August 3rd, 2020 at 2:12 pm
Multiple Choice Question: What should be your advice to your buyers? Pick the best answer:
A. Tell them that you highly recommend a non-contingent offer.
B. Make sure they understand the legal risks and consequences.
C. Tell them you won’t help them write a non-contingent offer.
D. Tell them there’s no such thing as a true non-contingent offer.
Answer: The correct answer is B. If your buyers want to write a non-contingent offer, make sure they understand that it’s a very risky thing to do. You may have been reluctant to select Answer B, because it sounds like you’d be giving the buyers legal advice, which you cannot do as a real estate agent. However, to make sure that the buyers understand the legal risks, simply give them and have them sign the C.A.R. Market Conditions Advisory (MCA). Paragraph 2.B. of the MCA explains to the buyers the inherent risks of a non-contingent offer.
Answer A is wrong. As specifically stated in the MCA, we do not recommend that buyers write non-contingent offers, and a buyer who writes a non-contingent offer is acting against our advice.
Answer C was a decent answer years ago when the C.A.R. Residential Purchase Agreement (RPA) did not address non-contingent offers. In those days, it was scary for an agent to draft a provision for a non-contingent offer, because the agent could be held liable if the wording caused a dispute to arise. Nowadays, a non-contingent offer is pretty straightforward. A buyer’s agent can simply check the “Removal of Contingencies” box in paragraph 14C of the RPA, and attach a Contingency Removal form to remove all the buyers’ contingencies.
Answer D is one of those things that some agents like to debate. However, Answer D is not the best answer in this situation, because the issue presented is whether the buyers should write a non-contingent offer. The issue presented is not whether the buyers’ offer is truly non-contingent, or whether they will actually lose their deposit if they do not close escrow.
Stay Tuned for Next Week’s Legal Tip: Is there truly such a thing as a non-contingent offer?
-Thank you to Diane Montgomery (Mission Viejo and Laguna Niguel Manager) for suggesting this week’s legal tip.
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