Last week I spoke about the shortage of inventory in the Laguna Niguel housing market.
This week I spoke with Realtor® friends in both Las Vegas and Phoenix. Both of these individuals expressed that the inventory was a fourth of what is was last year at this time and buyers are offering over asking price in many if not most cases. Orange County is not as bad but just the same buyers need to be familiar with buyer protections since they will be moving quickly.
The DRE (Dept of Real Estate) wants buyers of 1-4 unit properties to be protected. They must first be aware of how agency works and then the standardized contract has built in protections for the buyer. This only changes when a Realtor or a bank asset manager amends the contract. (Email me for a blank contract, email@example.com).
In a hot market your first goal is to get the property. After losing several bids you will understand what I mean. The contract also has several “contingencies”. This means the completion of the sale is contingent upon clearing these hurdles.
The first is financing. If you are buying from a new builder this might be your only contingency. Typically the buyer has 17 days to complete the appraisal and get loan approval – or at least feel comfortable there will be no problem getting the loan.
The second is the physical inspection of the property. This should be done quickly so the buyer does not waste money on the appraisal and then discovers that the condition of the property is unacceptable. In the case of a standard equity sale the buyer may negotiate with the seller for repairs. This is not true on short sales and REO properties.
HOA rules and financials, taxes, schools, geology and many more subjects can be contingencies as well. Just remember that all investigations should be done in 17 days. At that point the buyer will be asked to remove, in writing, all contingencies. Up until this time the buyer may cancel and receive most or all of the earnest money back.
Some escrow companies charge cancellation fees and any money spent on HOA documents may not be refundable.
After removing contingencies the earnest money is at risk. Typically sellers ask for one to three percent of the purchase price for earnest or good faith money. If the deal goes through, all of the earnest money is credited toward the buyer.