Sellers May Be Creating Additional Risk By Accepting No Contingency Offers
In this sellers’ market
, one of the recent trends has been for selling agents (those representing buyers) to write up offers with NO contingencies – no loan, no appraisal, no inspection. Most of the time the listing agent and seller deem that the “highest and best” offer includes no contingencies.
With so many cash offers we understand the logic behind waiving the loan and appraisal contingencies. Sellers do not wish to wait for loan approval or have a transaction slowed down by the loan process. For a buyer, a solid pre-approval should be good enough from a knowledgeable loan officer or loan broker. For the appraisal, the seller certainly will not wish to haggle over the amount determined by an appraiser.
But (and as Pee Wee Herman said in Pee Wee’s Big Adventure, “Everyone I know always has a big But…” eliminating the inspection contingency can be risky. In some cases the seller and listing agent have provided a package of inspection reports and they expect that to suffice for the buyer. Other sellers do not even provide basic termite or contractor reports. The listing agent will say that the property is being sold “as is.”
Certainly, in this market, most buyers will expect the property to be sold “as-is” with no repairs or repair credits however, when the seller doesn’t give the buyer any time to conduct their own inspections then they may lead to trouble down the line.
If a seller gets into a transaction where they have accepted a non-contingent offer, then they may be setting themselves up for a possible lawsuit. Let’s say that the seller accepts a non-contingent offer but later in transaction or after the transaction the buyer discovers some material defect. If the disagreement ends up in court the buyer will claim that he was forced to buy the house without the opportunity to inspect. The seller will claim that it was the condition of the market. Who is a jury going to side with? Do you want to take that chance?
Selling “As-Is” Still Means Allowing The Buyer Time For Due Diligence
Some real estate attorneys have mentioned that by accepting non contingent offers sellers and listing agents may be put themselves at risk even though the CAR contract (as are many real estate contracts) are “as-is” contracts.
How to solve the problem? Even if a buyer submits a non-contingent purchase offer, a smart seller and listing agreement will counter the offer with three day inspection. In other words the smart seller and listing agent want to give the buyer some opportunity to do their due diligence so later on the buyer can’t claim that they were “forced” into the terms dictated by the “market conditions”.