Hopeful Home Buyers Waive Contingencies to Compete in Red-Hot Housing Market
WALNUT CREEK (KPIX) -- One way that buyers in this hot real estate market are making their offers stand out is by waiving contingencies. Realtors worry this will lead to lawsuits.
Abhinav and Moshika Guha first started looking at homes in November. They've placed seven offers and been outbid every time.
"In some cases, actually, we have decided not to offer because we know we're going to lose out," Abhinav Guha said.
They're looking at every possible way to sweeten the deal.
"We're 49ers season ticket holders so we'd include one game of your choice for the 2021 regular season. We just did that this morning," Moshika Guha said.
In addition to tickets, they're planning to offer over listing whenever possible, plus something they've never considered before -- dropping all contingencies.
The most common types of home-buyer contingencies are:
- Financing, meaning the sale only goes through once the buyer has been approved for a loan.
- Inspection, where buyers can back out if an inspection reveals a problem they weren't aware of or they can demand the seller make repairs.
- Appraisal, meaning the home must appraise for equal or higher value than the offer.
- Home sale, the buyer can stipulate the deal won't go through until they sell their current home.
It's now common practice to waive all of these.
"Our agents are basically asking the first question: just how uncomfortable do you want to get?" said Earl Rozran, vice president of experience at Sereno Real Estate.
Rozran's main concern is the amount of money buyers stand to lose with these non-contingent offers should they need to back out.
"Their deposit is likely to go to the seller and 3 percent of a million dollars is $30,000 that walks out of your bank account," Rozran said.
"There is no out. So you have to walk away from the deposit, you have to walk away from in essence, $50,000," said Michael Delehanty, a real estate agent in Walnut Creek.
Delehanty says this market is unlike anything he's seen in his career. He hates the idea of dropping contingencies.
"It puts your client at risk. My job is to protect my client's interests, get them the house they want ... I think agents are going to find themselves in court at some point," Delehanty said.
Are the Guhas comfortable with this level of risk?
"We've just gotten over it a little bit," Moshika Guha said. "Whatever it takes to get the home we want, this is just how the market is."
According to the National Association of Realtors 76 percent of home sales in 2020 had contingencies attached. Nine percent of those fell through, mostly because many of those buyers lost work last year. Pre-pandemic home sale terminations were closer to 2 percent.
