Over the past few months we have received a few non-contingent offers on our listings. Contingencies are certain things that a buyer checks off through a transaction. Contingencies can include investigation, appraisal, financing, HOA information, title information, and even the sale of a buyer’s existing home. Removal of any contingency with an offer means a buyer is taking that contingency off the table. Let’s dive in…

A buyer who makes an offer contingent upon the property appraising is requiring that an Appraiser ensure the contract price is legitimate. If the home appraises for less than the contract price the buyer isn’t obligated to purchase the home at the contract price. If the home appraises for more than the contract price that’s great, but it doesn’t change the sales price. A buyer who removes the appraisal contingency with their offer is stating they don’t care if the home appraises for less than the contract. They will buy it anyways. This can mean they need to bring more money into escrow to make up the difference.

A buyer who removes the buyer’s investigation contingency is stating they will purchase the home regardless of what comes up in reports, disclosures, or inspections. A buyer who acts in such a manner had better think about the worst case scenario. In an ideal world this buyer would have access to an inspection and all reports prior to making this sort of offer. A buyer is welcome to do their own due diligence once in escrow, but they have no rights to bring a request for repairs / credit to the seller in the hopes of renegotiating.

A buyer who removes a loan contingency with their offer is usually a cash buyer. That being said, any buyer may remove this contingency. To do so a buyer would need to be certain their loan will go through, or have the ability to purchase a property with cash.

We had an instance this year where a buyer made an offer with zero contingencies. We represented the seller in this transaction. Once in escrow the buyer decided the home was not for them. This buyer had zero rights to the deposit, and they ended up walking away from a $40,000 deposit, which the seller retained as damages. The buyer made a business decision to walk away from the deal, and the seller made a business decision to retain the deposit. That was wild.

Another transaction, where we represented the seller, featured an offer with all buyer investigation contingencies and the appraisal removed from the contract. The buyer still needed to get the appraisal for their lender, but as mentioned above, the appraisal value was to have no influence on the transaction. The buyer proceeded to do a myriad of inspections, even after we provided a home inspection and termite inspection to all interested parties prior to accepting an offer. We provided these inspections upfront because wanted to get all of our cards on the table. The buyer came back at the eleventh hour and asked for a major reduction in price / credit after doing their investigations. We had no obligation to renegotiate as they removed their entire investigation contingency with their offer. Our disclosures didn’t come into play because they had removed their entire investigation contingency. They had also had our seller’s disclosures for a significant amount of time too prior to making this last minute request. The buyer’s Realtor stated their client’s loan had been approved so we requested their loan contingency removal, which represented their final contingency removal. When we obtained the loan contingency removal our transaction was solidified without any change in price or terms. Had the buyer declined to move forward they’re deposit would be in jeopardy.

Buyers should know what they’re agreeing to when making offers without contingencies. These offers can prove costly. Make sure you’re working with a Realtor who understands the contract.

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