Do contingencies make it more difficult to purchase a home?

Asked by Trulia San Jose, San Jose, CA Sun Jan 27, 2013

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Ruth and Perry Mistry’s answer
Ruth and Per…, Agent, Los Gatos, CA
Wed Jan 30, 2013
Hi Trulia San Jose:

Yes for sure.
A Contingency allows a Buyer to Back Out for " the reason called out in a contingency".

When a Seller in the present market if receiving any where from 8 - 44 offers on a property
with a Fourth all Cash with no contingency, and the other 1/3 coming in with cash and
no contingency, it becomes tough for Buyers to compete.

We live in a Metro that ranks in the top 10, where homes are selling the fastest.

Best regards
1 vote
Ricky Ablaza, Agent, Milpitas, CA
Mon Jan 28, 2013
Hi Trulia San Jose,

In a highly competitive seller's market, specially where there is little inventory and a LOT of buyers, adding contingencies to you offer will weaken your offer. In today's market, a cash offer or approved loan offer, as-is sale, all contingencies removed and an offer among the top 3 offers will give you a very good chance of winning the bids.

1 vote
Juliana Lee, Agent, Palo Alto, CA
Mon Jan 28, 2013
Yes, contingencies weaken your offer. If you are a seller and are choosing between two or more offers with similar offered prices, you would prefer the one which is most certain to close the sale quickly.

There are several reasons why a seller prefers fewer contingencies:
1.) The sooner a seller knows his house is sold, the sooner he can move forward with his own plans.
2.) If the buyer has lots of time to back out of the purchase contract because of one or more contingencies, something may happen to change whether the buyer wants to purchase the home.

There are different ways to make your purchase offer more attractive than the offers from competing buyers. Buying with all cash and with no contingencies is one of the strongest things you can do. If you need to get a loan or sell your current home there are things an experienced agent can do to make your offer more attractive.

Juliana Lee, MBA LLB
Cell: 650-857-1000
Top 3 real estate agent nationwide at Keller Williams Realty

Over 20 years experience
Over 1,000 home sales completed
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2 votes
Elena Talis, Broker, Palo Alto, CA
Mon Jan 28, 2013
Yes, they get the seller on the hook while the buyer has a way out. In the current seller's market it shifts the negotiation power back to the buyer. If it is a multiple offer situation, the offer with fewer or no contingencies will have a better chance to win.
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Terri Vellios, Agent, Campbell, CA
Mon Jan 28, 2013
In todays highly competitive market the most challenging contingency for a buyer to have is an appraisal contingency. Buyers are competing with all cash offers. Why does that affect the sellers? When offers are over asking and above recent comparable sales, the appraiser is going to have difficulty bringing the value in at contract price. When that happens the buyer can walk or may not have enough funds to make up the difference. Then the seller has lost a buyer.

If a Buyer is not in a position to bring more money to the table, I would not advise going without an appraisal contingency. Therefore the chance of them getting their offer accepted is slim. They need to understand that.

If they have parents who can gift them money, or other funds, it would be one way to get over the appraisal contingency. Buyers also need to understand, this is a heated market, one we've been in before and that is how inflation occurs. If they are not comfortable with paying more than a property is worth in an appraiser's mind, they can wait. Waiting may mean paying more. Because as these properties close they will be the new value.

And in life, what goes up - goes down. We just don't know how high and how long this one will last.
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1 vote
Grace Hanamo…, Agent, Cupertino, CA
Mon Jan 28, 2013
Simply put...

A contingency is a roadblock to completing a sale. As a result, in today's market, a contingency is deemed a weakness in n offer. The more contingencies that can be removed, the better.

Good luck,
Grace Morioka
Allison James Estates and Homes
1 vote
, ,
Mon Jan 28, 2013
Yes, they do.

This is why All California Mortage has just created the "Keys on Time" Loan Purchase Program to ensure that pre-approved and qualified purchase transactions fund on or before the scheduled Close of Escrow date.
Provided the loan type and the property type qualify for this program, and provided that we receives all required documents within the allotted time frames detailed in the program guidelines (The Close of Escrow must be a minimum of 18 days from loan submission)

Some exclusions apply.
Please feel free to contact me for details.

Thierry Abel
Senior Loan Consultant
All California Mortgage
A division of American Pacific Mortgage
P: (415) 464-8261
C: (415) 378-7508
F: (415) 464-2367
0 votes
My NC Homes…, Agent, Chapel Hill, NC
Mon Jan 28, 2013
Of course they do. Real Estate negotiations will always be easier with less contingencies. Each contingecy is simply one more thing for the Seller to be concerned about. The simplest transactions are when a buyer is prepared to take a property as is and pay cash.

This isn't the typicaly siuation however and so a Seller needs to consider/factor-in how difficult might the buyer be over home inspections related issues? How good is thier credit and what's the likelihood of them getting their mortgage and being able to close on time? Do they need to sell and settle another property first? Are they asking me for things I'm not comfortable with etc? The more contingencies the more potential pitfalls for the Seller.

That said, solving or overcoming these contingencies is afterall what we get paid for.
0 votes
Norman Aless…, Agent, San Jose, CA
Mon Jan 28, 2013
I agree with the other agents, Yes the less contingencies the better. Along with a small down payment if you have a lot of contingencies you can pretty much for get it in this market.
At your service,
Certified Ditreesed Property Expert
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