A buyer in Palmdale enters into a C.A.R. RPA and the property is in a Special Flood Hazard Area (SFHA). The seller delivers the Natural Hazard Disclosure (NHD) report identifying the flood zone status. The buyer, unhappy about the flood zone designation, wants to cancel. Under which provision may the buyer cancel the contract?
Correct Answer
C) The buyer may cancel under the investigation contingency if the NHD is received during the contingency period
Under the C.A.R. RPA, the buyer's investigation contingency allows the buyer to investigate all aspects of the property, including its location in natural hazard zones. If the NHD reveals the property is in a flood zone and the buyer is dissatisfied, the buyer may cancel within the investigation contingency period. Additionally, the buyer has a separate statutory rescission right under Civil Code §1103.3 after receiving the NHD.
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Related Topics & Key Terms
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Related Concepts
A financing contingency makes the purchase contract conditional upon the buyer obtaining mortgage approval within a specified time period. If the buyer cannot secure financing, they can cancel the contract and receive their earnest money back.
An inspection contingency gives the buyer the right to have the property professionally inspected within a specified time frame and to negotiate repairs or cancel the contract based on the findings.
Liquidated damages are a predetermined amount of money specified in the contract that the non-breaching party is entitled to receive if the other party breaches. In real estate, the earnest money deposit typically serves as liquidated damages.
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