My friend Elizabeth was kind enough to make this available for a re-blog. Enjoy!
Because of HVCC, some buyers are standing on shaky ground if they release contingencies. It's considered typical practice due to standard verbiage in the C.A.R. purchase contract to release contingencies on the 17th day after contract acceptance. Of course, there is a box to check that leaves the loan contingency in place until close of escrow, but try checking that box and see how far you get with the seller. So, most buyers are under the gun to perform all inspections and firm up their loans within 17 days.
The problem that can pop up in this market is when the agent is negotiating a Request for Repair. This is when a buyer finds some significant defect in the home and asks the seller to give a credit toward closing costs. If the seller agrees to credit the buyer, the seller, in return, may ask the buyer to release all contingencies. This action may put the buyer's earnest money deposit at risk if the buyer, for some reason, cannot close escrow.
Once a file gets into underwriting, it might not emerge as approved. The underwriter may ask for a review appraisal or issue funding conditions. It's a tricky situation if the buyer can't meet those funding conditions or the review appraisal returns with a lower opinion of value.
I have buyers in escrow on 2 homes in Land Park and another is buying a home in Curtis Park. All 3 transactions involve after-the-fact negotiations. Fortunately, these buyers are rock solid with high FICO scores, and the sales prices are in line with the comparable sales for the neighborhoods. But it still doesn't mean it's not risky to release contingencies.
What I wonder about are the buyers for homes in other areas of Sacramento, areas that aren't as stable as Land Park, areas where property values have declined more than 50% over the past 4 years, and the buyers have shaky credit. Those buyers might want to think twice before asking for a seller credit.
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Elizabeth Weintraub is an author, home buying columnist for The New York Times-owned About.com, a Land Park resident, and a Land Park real estate agent who specializes in older, classic homes in Land Park, Curtis Park, Midtown and East Sacramento. Weintraub is also a Sacramento Short Sale agent who lists and successfully sells short sales throughout Sacramento. Call Elizabeth Weintraub at 916.233.6759. Put 35 years of real estate experience to work for you. DRE License # 00697006.
The Short Sale Savior, by Elizabeth Weintraub, available through bookstores everywhere and at Amazon.com.Photo: Big Stock Photo
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C- Thanks for reblogging this as I didn't catch it the first time around. I have a deal like this right now due to close this week. We have yet to release the financing contingency and at the last minute, a review of the appraisal was called for. The whole deal may blow up at the last moment, but at least I know by not releasing the contingency, my client is still protected.
Christianne, I was very happy to reblog this. Elizabeth influenced me not to release the contingency as well. :-)