Real estate market conditions advisory

This week I’m having a deja vu from 2000.  If you were here in Silicon Valley then, during the “dot com boom”, you remember a frenzy with the hot sellers market, of home buying with multiple offers, and prices rising rapidly.

In some parts of the market, it’s back.

One of the ugly parts of that market is back too, the “non-contingent offer“.  I’m not talking about offers subject to the sale of another home (aka “contingent offers”). I’m talking about home buyers waiving their inspection contingency and their loan & appraisal contingencies.  (Not clear on home buyer contingencies? Please see my article: “Competing against multiple offers: contingencies and timeframes“.)

Listing agents know better than to give a counter offer demanding a non-contingent offer; that’s a lawsuit waiting to happen if the buyer feels coerced and later gets some sort of nasty surprise. But boy oh boy, do they know how to hint that it’s what they want.  And that’s not a lot different from demanding it.

Silicon Valley home buyers are given many disclosure and contract papers to sign when submitting their bids to purchase residential real estate.  It is important to read and understand them and the risks about which they warn.  One disclosure which is used – or should be used – on most every transaction is the “market conditions advisory“, which warns of risks in multiple offers and some of the ways that buyers may try to have the winning bid that may not really be a good idea in the long run.  The full name of the form is this: (more…)

Selling a house or home is usually very challenging and emotional, even under the best of circumstances.  It’s all the worse if the folks on the other side of the transaction – the buyers, their real estate agent or both – are difficult, rude, hot headed, verbally bullying, not performing on time or otherwise making the escrow and sale more upsetting than is necessary.  What can a seller or listing agent do about it? Can the seller cancel the contract and boot the bad guys out?

If there is a seller contingency, it may not be hard to do this at all. (For example: home sale subject to seller finding replacement property – they can just not look!) But that’s rare. Most of the time, only the home buyer has contingencies.

In Silicon Valley, we have 2 different contracts in use – the CAR and PRDS.  Before we can answer the question of how to get rid of nasty buyers or agents, it’s important to know and understand the contractual agreement clearly.  So the first question is “what does the contract say?“  Often the sellers don’t have an easy way to boot obnoxious agents out of contract.  But it may be possible to catch the buyers in a default (that is, not performing) via some subtlety in the contract and that may eventually enable the sellers to cancel the contract.

Both of the purchase agreements used in Santa Clara, San Mateo and nearby counties include a list of rights and responsibilities for both sellers and buyers.  They also include time frames: buyers and sellers must do these certain things within a specified number of days (some are boilerplate and others are written in and variable). So these contractual “technicalities” may be time frames which have been ignored inadvertently.

It’s no slam dunk most of the time, though, to get rid of buyers and their real estate representatives.  Usually it will be necessary to put the other side on notice that they are out of contract and to give them a chance to get back on track.  This official notice that they are at risk of having the sale cancelled is called a “notice to perform“. (more…)

This is 2000 all over again:

• rapid price appreciation
• multiple offers
• overbids
• offers with NO contingencies for loan, property inspection and appraisal
• and once in awhile, “sharp bids”

This type of market is a delight for sellers and a nightmare for buyers.  Some of the more crazy terms led to lawsuits and more disclosure paperwork after the purchases of 2000 led to the lawsuits of 2002….

Please think twice before writing offers with no contingencies at all!

In the first four posts in this series on writing an offer when competing against multiple offers to purchase a Silicon Valley home, we focused on the financial terms.  In the next few posts, we’ll address the non-financial terms that can “sweeten the pot” to help you succeed – without giving away all your rights!

Price & terms work together like the scales of justice.  When they are “level” to each other, you have a normal sale with a good reflection of market value (normal terms, normal price).  If one is low (poor), the other will need to be high (good) to “even out” the balance.  If the terms are fantastic, the seller may sell the home for a little less or may pick that offer if there are multiple bidders.  If the terms are terrible, the seller may only sell the home if it sells for a bit more to compensate for the terms.    With multiple offers, sometimes you can only go just so far with price.  But often you can improve your offer with the right terms.

Today we’ll focus on contingencies specifically.  Contingencies are not the only terms, but they’re among the most important terms in your offer to buy a home.  We’ll look at both which contingencies may be involved in your offer and potential transaction, and how much time (how many days) to allow for each.  In my opinion, you should never write an offer with NO contingencies. It is just too risky!

(more…)