In 2021, almost 75% of the offers written by Nest Realty agents were for properties with multiple offers, up from 45% a year earlier. And that trend doesn’t show any sign of abating in 2022.
Given a widespread inventory shortage, low mortgage rates, and high levels of demand, the competition for available homes in Central Virginia is red-hot. Buyers all want an edge in the bidding process and are often willing to make offers above the seller’s asking price and without certain contingencies — extra requirements usually built-in to our standard purchase agreements.
While desperation is the parent of such offers, and although current market conditions make it difficult to mount a successful bid that includes traditional contingencies, such a strategy has risks.
First, when you make an offer to buy real estate it typically includes a deposit, thousands of dollars to assure the seller that you intend to complete the transaction. In the case of an offer without contingencies, it may not be possible to get out of the deal without losing your deposit if the property turns out to have problems, a huge penalty.
Or, to preserve your deposit, you might go through with the transaction and thus buy a home that really doesn’t meet your needs or preferences. You can be stuck with it for years.
Real estate agreements can be written to favor the seller or the buyer. Like most good contracts, our local real estate purchase agreement, provided to Realtors by the Central Virginia MLS, offers a good deal of balance between the parties and is designed to avoid future disputes. However, standardized agreements may not reflect your particular needs and preferences and for that reason, you may want to add or subtract contingencies.
Like sale agreements, contingencies can favor the buyer or the seller. The most contentious of them all is often the inspection contingency, and there are myriad ways they can be written. A contingency might say that the buyer has the right to have a home inspection within so many days “for informational purposes only.” Such language does not require the seller to make repairs, and it does generally not allow the buyer to unilaterally terminate the transaction without penalty.
A second version of the inspection contingency–at the other extreme–might give the buyer the right to have a property inspection and require the seller to make all repairs, otherwise, the deal is off. Sellers will object to such language because it does not limit their liability at all (and they’re probably getting other offers that let them mostly or completely off the hook on defects.)
A third version of the inspection clause might say that the buyer can get a property inspection and that the seller will be responsible for repairs that exceed some threshold that represents a dollar amount the buyer can afford to take care of themselves and the seller finds risk-tolerable. This might work for both buyer and seller.
The list of alternative contingency approaches could go on. The bottom line is this: contingencies are complex. The Harton Team at Nest Realty spends a lot of time going through the options with its clients, weighing the pros and cons of each, and laying strategies that balance their unique priorities. We look forward to laying out strategies with you when you’re ready to buy or sell a home!
