Contingencies in Los Gatos: What Buyers Need to Know

Writing an offer in Los Gatos and wondering which contingencies to keep, shorten, or waive? You are not alone. In a competitive Silicon Valley market, you want to win without taking on avoidable risk. This guide explains how contingencies work in California contracts, what is typical in Los Gatos, and practical ways to stay competitive while protecting your deposit and long-term interests. Let’s dive in.

What contingencies are and why they matter

Contingencies are built-in protections in your purchase contract. They give you time to verify condition, confirm financing, review title or HOA documents, and ensure the home appraises for your lender. If a contingency is not satisfied within the agreed period, you can usually cancel and recover your deposit subject to the contract terms.

In California, sellers must provide required disclosures such as the Transfer Disclosure Statement and Natural Hazard Disclosure, and additional items where applicable. These are helpful, but they do not replace your right to inspect or review. Contingencies let you trust but verify before you fully commit.

The big three in Los Gatos

Inspection contingency

Purpose: Gives you time to inspect the home and negotiate repairs or credits, or cancel if significant issues are found.

Local practice: Buyers commonly order a general home inspection and targeted inspections such as pest, roof, sewer scope for older homes, foundation or seismic evaluations, chimney, and HVAC. For older Los Gatos properties, structural, drainage, and foundation items often get extra attention.

Typical timeframes: In multiple-offer situations, 3 to 10 calendar days is common for the inspection window. More conservative offers may request 10 to 17 days.

Options and variations:

• Keep the contingency and negotiate repairs or a credit after inspections.
• Use a limited-scope inspection contingency that narrows what you will inspect or caps repair credits.
• Conduct pre-offer inspections with seller permission to shorten post-acceptance timelines.
• Waive inspection entirely. This is the highest-risk option and is not recommended without strong due diligence.

Key risk: Waiving inspection shifts unknown repair costs to you. Disclosures help, but they are not a substitute for professional inspections.

Loan (financing) contingency

Purpose: Protects your deposit if your lender cannot approve the loan on the agreed terms within the timeframe.

Local practice: Loan contingencies are standard. Competitive offers often shorten this period and lean on strong pre-approval or pre-underwriting from reputable lenders who understand local income and stock-compensation documentation.

Typical timeframes: The traditional window is about 17 to 21 days. Strong buyers may shorten to 10 to 17 days if pre-underwriting is in place.

Options and variations:

• Shorten the loan contingency and present evidence of underwriting progress.
• Remove the loan contingency only if you have cash or near-certain financing. This carries meaningful deposit risk if the loan fails.

Key risk: If you waive the loan contingency and financing falls through, you could forfeit your deposit and face a potential breach claim.

Appraisal contingency

Purpose: Protects you if the property appraises below the contract price. Lenders rely on the appraisal to confirm collateral value.

Local practice: Appraisal issues can surface in fast-rising markets. Buyers often use appraisal-gap strategies that commit to covering a defined amount above the appraised value.

Typical timeframes: The appraisal is ordered after loan application. Review and remedies often track the loan contingency timeline, with appraisal reports commonly arriving within 7 to 14 days of order.

Options and variations:

• Keep the appraisal contingency and add a gap clause that specifies how much shortfall you will cover.
• Remove the appraisal contingency only if you can safely bring additional cash or you are a cash buyer.

Key risk: Without an appraisal contingency, you must cover any shortfall or renegotiate. Lenders do not fund beyond appraised value without changing loan-to-value terms.

Other protections to consider

Title and escrow review

Purpose: Confirms you will receive a marketable title free of unacceptable liens and encumbrances. You will review the preliminary title report and listed exceptions.

Local practice and timing: Title companies in Santa Clara County provide preliminary reports early in escrow. Review is typically aligned with your other contingency periods.

Risk to manage: Easements, recorded agreements, or unpermitted work history can affect value or future plans. Early review lets you request cures or accept exceptions knowingly.

HOA and CC&R review (if applicable)

Purpose: For condos and planned developments, you review association financials, insurance, CC&Rs, meeting minutes, and any special assessments.

Timing: Buyers typically take 3 to 7 days to review HOA documents. Lenders may also review the HOA’s financial health.

Risk to manage: Restrictions, assessments, or weak reserves can add costs or limit property use. Read before you remove your contingency.

Sale-of-buyer-home contingency

Purpose: Lets you make your purchase dependent on selling your current home.

Local reality: In competitive Los Gatos segments, sellers rarely accept this. If used, expect strict timelines or proof that your home is already listed and progressing.

California-specific items

• Pest and termite: A common addendum allows for inspections and negotiated remedies or credits.
• Sewer or septic: Most Los Gatos properties are on sewer, but some outlying homes have septic systems. Order a septic inspection when applicable.
• Environmental and seismic: For hillside or older homes, buyers often investigate soils, drainage, and seismic retrofit history.

Timing and process in a competitive market

Escrow length: Many California escrows close within 17 to 30 days. Faster closings are possible but require lender alignment and quick appraisal scheduling.

Deposits: Earnest money is negotiated and held in escrow, then credited at closing. Larger deposits can signal commitment, but your contingency rights still matter.

Deadlines and notices: Your offer should clearly state each contingency period and remove-by date. If you miss a deadline, the seller can issue a Notice to Perform. Failing to respond can be treated as a waiver under the contract.

Smart strategies to compete without overexposing yourself

• Present strong lender documentation. Ask for pre-underwriting or written evidence that you are near clear-to-close.
• Show proof of funds for your down payment, reserves, and any planned appraisal gap coverage.
• Shorten, do not automatically waive, key contingencies. Examples: 5 to 7 days for inspections and 10 to 14 days for loan approval, if your file supports it.
• Consider limited-scope inspection language or a cap on repair credits to reassure sellers while keeping essential protection.
• Use an appraisal-gap clause with a specific dollar cap. Pair it with proof of funds so sellers trust your commitment.
• If appropriate, request permission for pre-offer inspections to reduce uncertainty and shorten timelines later.
• Consider an escalation clause to keep contingencies while staying price-competitive in multiple-offer rounds.
• Coordinate early with your lender and agent on appraisal ordering, document flow, and a realistic closing calendar.

Risk tradeoffs and how to mitigate

• Waiving inspection: You risk undiscovered issues like foundation, drainage, roofing, termites, mold, or older-system failures. Mitigate with pre-offer inspections or very short but sufficient post-acceptance windows.
• Waiving loan: If the loan fails, you may lose your deposit. Mitigate with robust pre-underwriting and remove only if your risk is truly minimal.
• Removing or narrowing appraisal: You must bring extra cash if value comes in low. Mitigate with a clearly capped appraisal-gap commitment and verified funds.
• Reducing title or HOA review: You could accept restrictions or costs you would not have chosen. Mitigate with early document review and targeted questions for the seller and title.

Pre-offer checklist for Los Gatos buyers

Have these ready before you write:

• Lender pre-approval, ideally with evidence of pre-underwriting or conditional approval.
• Proof of funds for your down payment, reserves, and any planned appraisal-gap coverage.
• Recent paystubs, W2s, tax returns, and documentation for stock options or RSUs.
• If competing, a clear plan for shortened contingency periods and a feasible closing timeline.

Ask these questions early:

• What contingency timelines will the seller consider, and do they have a preferred close date or rent-back need?
• Are seller disclosures, permit history, and the preliminary title report available before offer?
• For condo or HOA properties, can you review the HOA packet upfront?

Draft your contingency language clearly:

• Use exact calendar days and start dates, for example, “inspection period: X calendar days after acceptance.”

• Clarify whether a contingency period begins upon delivery of specific documents.

• Spell out who pays for inspections, how credits work, and any caps on repair credits.

• If using an appraisal gap or escalation clause, specify caps and attach the related addenda.

Red flags to watch in Los Gatos

• Older homes with unpermitted additions or remodels. Confirm permit history and disclosures.
• Hillside properties where soils, drainage, retaining walls, or potential landslide areas warrant deeper review.
• Cosmetic “flips” that may hide deferred maintenance.
• Long-held properties where sewer, septic, or older systems have not been recently evaluated.

How we help you move decisively

In a fast Los Gatos market, execution matters. You want an offer that is attractive to the seller and safe for you. Our senior-agent model means you work directly with experienced professionals who help you structure the right contingency mix, align lender timelines, and negotiate credits or repairs with clarity.

We coordinate inspections, title and HOA review, and appraisal strategy, then track every deadline so you do not risk an accidental waiver. For relocation and tech buyers, we pair curated access with fast, technology-enabled communication so you can act with confidence on tight timelines.

Ready to craft a smart, competitive offer with the right protections? Reach out to the Bouja & Swenson Group for a focused plan tailored to your goals.

FAQs

What is a contingency in a California home purchase?

• A contingency is a contract clause that lets you cancel and recover your deposit if specified conditions, such as inspection, loan approval, appraisal, title, or HOA review, are not met within agreed timelines.

How long are typical inspection, loan, and appraisal contingencies in Los Gatos?

• Competitive offers often use 3 to 10 days for inspections and 10 to 17 days for loan and appraisal milestones, while traditional timelines can extend to about 17 to 21 days for financing.

Should I waive the inspection contingency to win in multiple offers?

• It is risky. Many buyers instead shorten the inspection window, perform targeted pre-offer inspections, or limit remedies with a repair-credit cap to stay competitive while reducing exposure.

What is an appraisal gap clause and how does it work?

• It is a written commitment to cover a specific shortfall if the appraisal comes in below the contract price, usually capped at a set dollar amount and supported by proof of funds.

What happens if I miss a contingency deadline in escrow?

• The seller can issue a Notice to Perform. If you do not act, your inaction can be treated as a waiver, which may put your deposit at risk if issues arise later.