You want to win the house in San Jose without putting your deposit, financing, or peace of mind at risk. In a market where strong offers are the norm, it can feel like your only option is to waive everything and hope for the best. You do not have to overreach to compete. In this guide, you’ll learn how loan, appraisal, and inspection contingencies work in California contracts, when to shorten versus waive, and how to plan for appraisal gaps so you can write a confident, compelling offer. Let’s dive in.
Contingencies, in plain English
Contingencies are contract protections that let you cancel or renegotiate if certain conditions are not met by specific dates. In California, the Residential Purchase Agreement and related addenda spell out these timelines and notices. The mechanics are standardized, but your exact dates and rights depend on your offer and the forms you sign.
In Santa Clara County, multiple offers are common, and sellers often prefer shorter timelines. Your goal is to balance offer strength with smart protection so you can close with confidence. Always confirm deadlines and wording with your agent, lender, and escrow officer before you commit.
The three big contingencies
Loan contingency: Protect your financing
A loan contingency protects you if you cannot obtain the agreed financing by a set date. It typically references loan type, amount, rate ceiling, and the date you must remove the contingency.
- Typical local practice: Short to moderate removal windows are common in competitive Silicon Valley offers. You’ll see ranges from about a week to three weeks, depending on your lender and file.
- Key risk: If you waive and your loan stalls, you could be in breach, lose your deposit, and face other remedies. If you shorten too much, underwriting or appraisal may not finish in time.
- Pro tip: Align your timeline with your lender’s written expectations. For an overview of the mortgage process and timing, review the Consumer Financial Protection Bureau’s guidance in the Owning a Home section, such as the CFPB’s mortgage process resources.
Appraisal contingency: Manage value risk
Most lenders base your loan amount on the lesser of the appraised value and the contract price. If the appraisal comes in low, the lender reduces the loan amount, and you must either bring more cash or renegotiate with the seller.
- If you include an appraisal contingency, you can cancel or negotiate if value falls short. If you waive it, you remove that contractual escape, and you must still cover any shortfall to close.
- An appraisal-gap guarantee can strengthen your offer. You commit in writing to cover a set dollar amount or the full difference between appraised value and price. This does not change the lender’s loan size.
- For background on what an appraisal is and how it’s used, see the CFPB’s explanation of home appraisals.
Inspection contingency: Know what you’re buying
An inspection (investigation) contingency gives you time to inspect and review disclosures, HOA documents, and reports. You can request repairs or credits, or cancel if findings are unacceptable within the timeline.
- Typical ranges in California: About 5 to 17 days, depending on the property and agreement. In hot listings, buyers may shorten to a week or less if inspectors are ready.
- If you waive inspection rights, you accept the property as-is, and surprises after closing are yours to handle, except for issues the seller was required to disclose.
- Strategy tip: If disclosures and pre-listing reports are thorough, you may shorten the timeline and book expedited inspections to stay competitive.
San Jose realities: Strong offers, smart safeguards
Silicon Valley listings often draw multiple offers, especially in prime neighborhoods like Willow Glen, Almaden, and Cambrian. Sellers tend to favor clean terms, shorter escrow, and fewer conditions. You can still protect yourself while signaling strength.
- Confirm your lender’s underwriting speed and appraisal scheduling before setting dates.
- Plan to order inspections right away, ideally with inspectors held on standby for tight windows.
- If you expect to bid above recent comparable sales, prepare an appraisal-gap plan.
For context on how sellers evaluate multiple offers, see the National Association of REALTORS guidance on handling multiple-offer situations.
Shorten or waive: A practical framework
When to shorten, not waive
- You have strong pre-approval and verified funds, but you want a safety net for a last-minute underwriting or documentation hiccup.
- Your inspector can get onsite within a few days, you are comfortable moving quickly, and you accept limited negotiation time.
- You and your lender agree in writing on realistic dates for appraisal and final approval.
Partial concessions that still protect you
- Keep the loan contingency, shorten the timeline, and add a capped appraisal-gap guarantee.
- Offer to cover a specific dollar amount if the appraisal falls short, while preserving your right to cancel if financing fails for other reasons.
- On inspections, keep the contingency but state your intent to focus on major health, safety, or system issues only. Your agent can structure this as a clean, respectful term.
When a waiver can make sense
- You are a cash buyer, or you have firm backup financing and liquid reserves to close without a loan if needed.
- You have reviewed thorough disclosures and completed inspections before writing the offer, or you accept the property as-is.
- Your lender has provided written confirmation of your capacity to close regardless of an appraisal shortfall.
Never waive without proof
- Get written lender confirmation on underwriting timing and how a low appraisal will be handled.
- Document any appraisal-gap promise and its cap in an addendum. Verbal promises are not enforceable.
- Understand that removing contingencies increases your exposure to deposit loss and other remedies if you cannot close.
Appraisal-gap planning that works
Appraisal gaps are common when prices move faster than closed comps. Use a structure that matches your liquidity and risk tolerance.
Common structures
- Appraisal-gap guarantee: You commit to cover a stated dollar gap or full difference.
- Increased down payment: Lower your loan-to-value target so a low appraisal still fits your program.
- Backup financing or bridge funds: Secure a HELOC, bridge loan, or private funds to deploy if needed.
- Seller concessions tied to appraisal: Less common in hot markets, but sometimes negotiable.
For a plain-language primer on appraisals and lender rules, the CFPB’s appraisal resources are a helpful reference.
Lender realities
- Lenders base the loan on the appraised value, not the contract price. Your gap plan covers only the cash difference.
- If you bring more cash, expect to document and season those funds per lender requirements.
- Gifts and other sources require lender-approved documentation and may have program limits.
Pros and cons
- Pros: Stronger offer, more predictable closing, and clearer communication with the seller.
- Cons: Requires liquidity, increases cash exposure, and does not address non-appraisal loan denials.
Sample math you can run with your lender
- Let P = purchase price, A = appraised value, LTV = loan-to-value ratio used by your lender.
- If your loan is based on A, your loan amount is LTV × A.
- Your required cash to close increases by the amount P minus A, minus any extra down payment you already planned.
- If you offer a gap cap G, your maximum extra cash is the lesser of G or the shortfall.
Quick decision inputs for San Jose buyers
- Financing strength: Pre-approval quality, size of down payment, and reserves to cover a gap.
- Property profile: Age, condition, disclosures, HOA complexity, and any specialized inspections needed.
- Competition level: Offer count, seller preferences, and whether cash offers are in the mix.
- Deposit size and risk tolerance: Larger deposits raise the stakes.
- Timeline realities: Appraisal booking, HOA doc delivery, title reports, and escrow-specific timing.
Visual guides to align risk and reward
Use these concepts to map your offer strategy. Your agent can turn them into simple graphics for clarity.
- Risk/reward matrix: Plot offer strength from low to high against buyer financial risk from low to high. Quadrants range from Conservative to Aggressive, plus a Cash Buyer path.
- Timeline bars: Show example windows for inspection and loan contingency removal under standard, competitive short, and all-cash scenarios. Always confirm actual dates with the contract forms and lender.
- Appraisal-gap flowchart: If you will offer above list, decide if you are cash or financed, then determine how you will fund a possible gap and what cap you are comfortable with.
- Scenario cards: First-time buyer, move-up with bridge funds, cash investor, and high-risk waiver examples with quick pros and cons.
Checklists before you remove contingencies
Loan contingency checklist
- Get written confirmation from your lender on appraisal scheduling and clear-to-close timing.
- Verify reserves for appraisal gaps, closing costs, and rate-lock considerations.
- Confirm availability and timeline for any bridge, HELOC, or secondary funds.
Inspection contingency checklist
- Pre-book inspectors who can work within shorter windows.
- Review all seller disclosures and HOA documents as early as possible.
- Consider an as-is posture with the right to inspect, focusing on major items only.
Appraisal-gap checklist
- Put the gap agreement in writing with a clear dollar cap and conditions.
- Ensure funds are documented and acceptable to your lender.
- Align the gap cap with your overall cash plan so closing remains feasible.
Protect your deposit and timelines
Your earnest money deposit is at risk if you remove contingencies and cannot close. California contracts require specific written notices to remove contingencies and to cancel. Work with your agent to follow the correct California Association of REALTORS procedures and to coordinate with escrow on funds and timelines.
If you are considering waiving protections, speak with your lender, and consider consulting an attorney to understand potential liability. Market norms change quickly in Santa Clara County, so align your strategy with current conditions and your personal risk tolerance.
Bottom line
You can write a competitive San Jose offer without gambling your future. Shorten timelines where your team can deliver, plan for appraisal gaps with a clear cap and documented funds, and keep the protections that matter most for the specific home. The right structure shows strength to the seller while keeping your path to closing realistic.
Ready to craft a smart, strong offer strategy for Silicon Valley? Reach out to Unknown Company to talk through your goals and next steps.
FAQs
What is a mortgage contingency in California?
- It is a clause that lets you cancel or renegotiate if you cannot secure the specified loan terms by the agreed deadline, as outlined in standard California purchase contracts.
How long are typical contingency periods in San Jose?
- In competitive situations, buyers often shorten to about one to two weeks for loan and roughly a week for inspections, but you should set dates your lender and inspectors can meet.
What happens if the appraisal is lower than the price?
- The lender bases the loan on the appraised value, not the price, so you must bring extra cash, renegotiate, or use an appraisal contingency if you kept one.
Is waiving an inspection contingency common in Silicon Valley?
- It happens in hot listings but carries risk, because you accept the home as-is; many buyers instead shorten the inspection period and focus on major items.
How does an appraisal-gap guarantee work with a loan?
- You commit to add cash up to a set cap if the appraisal is low; it does not change the lender’s loan amount, so you must document funds to close.
How can I protect my deposit in a bidding war?
- Keep at least one key contingency or set realistic shortened timelines, document all promises in writing, and only waive after your lender confirms you can close even if the appraisal is low.