by Catherine Fisher, Managing Principal Broker of Town & Country Realty
The standard residential sales contract used by Oregon licensed real estate brokers has a number of contingencies specifically designed to protect the Buyer. Some of these contingencies, with short descriptions, are:
• Financing – If the Buyer is unable to obtain the necessary loan, the Buyer may terminate the transaction.
• Appraisal when financing is involved – If the home does not appraise for the agreed upon price, price may be renegotiated or the contract may be terminated by the Buyer.
• Title review – The Buyer may object to any issues found in the preliminary title report and/or neighborhood covenants, conditions and restrictions.
• Seller’s disclosure review – The Buyer may revoke an offer during the first 5 days of reviewing the Seller’s property disclosure statement.
• Lead based paint – The Buyer may terminate if lead based paint is found.
• Home Inspection – The Buyer may negotiate Seller paid repairs or terminate if unsatisfactory conditions are found.
As the market has heated up, we have seen Buyers choosing to waive some or all of these contingencies. But is that really a good idea? I understand that if there are multiple offers on a property, it may be necessary to waive some contingencies. However, all Buyers should be careful about the rights that they give up as the potential cost or loss to the Buyer could be enormous. For example, I once had a Buyer request to waive the home inspection contingency because he was purchasing the home from his father-in-law’s trust. I convinced him that it was very important because no one had been in the attic or crawlspace for several years. Thankfully he agreed. The inspector found major dry rot in the crawlspace and the cost to repair it was $14,000. We were able to negotiate that the trust pay for the entire cost of the repair. Had the Buyer waived the inspection, he would have been responsible for the entire cost of the repairs himself. Or, if the Buyer is obtaining a loan and the appraisal comes in low, but the Buyer waived the appraisal contingency, the Buyer will be responsible for the difference between the appraisal value and purchase price. That might be okay if the difference is on the small side, but what if the appraisal was off by $50,000? The Buyer is now responsible for the entire $50,000 plus their down payment and closing costs. That may not be possible for the Buyer. Should the Buyer terminate the transaction because of his/her inability to cover the difference in the low appraisal, the Buyer may lose the earnest money deposit made at the time of writing an offer. Your Broker should help you determine which contingencies you want to protect and which might be worth waiving, when faced with a multiple offer situation.
Call Town & Country Realty today at 541-757-1781 in Corvallis and 541-924-5616 in Albany today so you can get the house you want and be protected in the way you need. You will be glad you did!