January 18th, 2013 at 7:29 pm
Specifically, whenever you discuss these types of clauses with a buyer, you have to explain not only the benefits of including them in your offer, but also the risks. For example, if you discuss the possibility of waiving the loan contingency, you also have to explain what that means. You have to tell your buyer that, if they removed their other contingencies and don’t get a loan, they will not have a cancellation right and will lose their deposit if they do not go forward. If you discuss the possibility of releasing money early, you have to warn them that, even if they cancel the deal appropriately, getting money back from the seller will be extremely difficult. And, if you discuss waiving all contingencies in the offer for a very popular property, you need to go through each normal cancellation right, explain what it normally protects, and make the buyer understand what they might be stuck with. For example, if I waive my inspection, the property may have numerous problems that cost me significant money to fix. If I waive my title contingency, there may be an easement that I have to accept against my wishes. And, if I waive the HOA contingency, there may be something in the CC&Rs that I don’t want to accept but have to f I don’t want to breach the agreement. In short, you need to make sure your buyer understands that, even though these proposals may make them more likely to get the house, they may include downsides which make the house different than they think and not what they want.
In the course of drafting these offers, one thing you should remember is the breadth of the investigation contingency in the RPA’s paragraph 10. As you know, that clause allows the buyer to investigate “any matter” relating to the property. In fact, the Buyer’s Inspection Advisory recommends that the buyer investigate almost everything you can think of, including the buyer’s “personal preference.” As a result, if you keep the investigation contingency, which lets you get out of the deal for almost any reason, you are protecting yourself against problems which arise by waiving other contingencies. For example, if I waive my loan contingency and cannot get a loan, you can always come up with some “matter” affecting the property that causes your cancellation. In other words, you can use your investigation contingency as protection against the waiver of others. So, while I would never recommend that my client waive their contingencies (suggest that they shorten them instead), always recommend keeping the investigation so they have as much protection as is possible.
As always, please call us with any questions you may have.
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