Non-contingent Offers Return; Buyer Beware | Print |  E-mail
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Thursday, 19 April 2012 13:23


Real Estate Reality


By Carl Medford, CRS
Special to the Forum



I’m old enough to know that life comes in circles… hang around long enough and things you thought were gone will suddenly re-appear.


Like men’s neck ties… if I’d only hung on to some beauties from years ago, I could wear them again!


While some things are OK to be back in vogue, others are not: we’re seeing a return to some real estate practices many hoped had gone the way of the dodo bird.

 


Non-contingent offers.

When markets overheat and multiple offers proliferate, some buyers become desperate and resort to whatever means necessary to land a home.



This can include shortening contingency time periods to “sweeten” a deal or removing them all together.


A standard residential real estate transaction for properties with four units or less includes three contingencies: loan, appraisal and inspections.


These are like “Get-Out-Of-Jail-Free” cards. If something happens to your loan, the house doesn’t appraise at contract value or your inspections uncover issues that you can’t live with — contingencies give you an opportunity to leave the transaction and get your good-faith deposit returned.


Contingency time periods are determined up front and, once a contract is signed, serve as transaction mileposts. After contingencies are removed, if you cancel a transaction, you run the risk of losing your good-faith deposit.


While standard purchase agreements default contingencies to 17 days, they’re frequently shortened to make offers more attractive. And, some reason, if we’re going to make them very short, why not just remove them all together?


It’s a tactic that can seriously harm buyers and lead to long-term issues, including litigation. Deeply concerned the last time these appeared, the California Association of Realtors issued a Market Conditions Advisory warning of the practice and inherent risks involved. Starting as a one-page document signed by buyers, it’s grown to two pages and now must be signed by both buyers and sellers. It includes the following:


“There is an inherent risk in writing a non-contingent offer. Only you, after careful consultation and deliberation with your attorney, accountant or financial advisor, can decide how much risk you are willing to take. It is your decision alone and cannot be made by your broker or real estate agent.”


Central Alameda County Realtors recommend you avoid this practice at all cost. You may get the property, but end up with a whole lot of grief in the bargain.

 


Carl Medford is a licensed Realtor with Prudential California Realty in Castro Valley. This article is sponsored by the Central County Marketing Association at www.ccmgtoday.com

 


 

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