Sound Off:
What are the pros, cons to contingencies?
A: As spring progresses, the real estate market continues to be very competitive. Buyers are doing all sorts of things to acquire houses beyond writing the heartfelt “pick me” letter. In some cases, buyers will waive certain contingencies that are commonly included in an offer. There are various contingencies in a real estate contract, including inspections, title and financing/appraisal.
Here in Marin, we are increasingly seeing more and more sellers provide the buyers with a complete buyers package, which typically consists of all inspections — the most common are home, pest, sewer lateral and drainage — as well as all required disclosures, plus the city resale report, the preliminary title report and the Natural Hazards report.
If the buyer has received a complete buyers package upfront, and reviewed it thoroughly, then that may allow them to feel comfortable in writing an offer with few, or in some cases, no contingencies. The buyers’ agent can help assess the offer situation of a particular home. The buyer needs to understand the risks involved, and evaluate them against their own risk tolerance and desire to purchase that particular property. If it feels too risky, there will always be other homes to bid on.
Kathleen Daly, Coldwell Banker, (415) 925-3205, kdaly@cbnorcal.com; Lisa Lange, Coldwell Banker, (415) 464-3318, lisalange@coldwellbanker.com. A: Whether or not to include contingencies in an offer is different with each client and property. In the San Francisco/Bay Area market, having as few contingencies as possible will make an offer more appealing to a seller.
Determining whether to have contingencies and which contingencies are necessary depends on a variety of factors.
Is the buyer paying cash or getting a loan? If the buyer is getting a loan, how much of a down payment are they committing?
How much do we know about the condition of the property? It’s important that a buyer understand what they are buying and do their due diligence while still being competitive. There are strategies based on what we know and what we still need to find out.
How much interest and activity is the property getting?
It is very common to present a contingent-free offer when there is a lot of interest in a property. Good communication with the listing agent and mortgage broker is also important. Knowing the best way to package and present an offer also will put a buyer at an advantage. Each property and client are different, which makes every day in real estate exciting.
Beverly Barnett, Pacific Union & Christie’s International Real Estate,
(415) 302-9052, beverly@beverlybarnett.com. A: Contingent-free offers go to the top of the pile. There are basically two kinds of contingencies: those pertaining to the property itself and those dealing with the buyer.
Every buyer needs to be preapproved for a loan and have evidence that the down payment is liquid. When representing a buyer, I run the comps up front so my client is reassured the appraisal will not be an issue. Thus, there is no loan contingency.
When representing a seller, I prepare an extensive disclosure package up front, including inspections, and if needed, bids for repair work. Successful buyers will go over the disclosures with their agent and presumably be able to either write a non-contingent offer or one with a very short review period of the disclosed items.
In a multiple offer situation, if the non-contingent offer is not the high offer, then, with the seller’s permission, I make several calls. I call the agent with the non-contingent offer to ask whether her buyer will pay more, and I call the agent with the high offer but with a contingency to ask whether her client is prepared to drop the contingency.
Astrid Lacitis, Vanguard Properties, (415) 860-0765, astrid@vanguardsf.com