Right now, buying real estate can be incredibly frustrating. Indeed, in Arizona and other states, reports show that real estate agents submit 5-6 offers per buying client before one is accepted and, oftentimes, it takes even more submissions before an offer is finally accepted. Because many buyers and their agents are striking out, some buyers are resorting to dangerous strategies to get their offers accepted. These tactics, which include submitting all-cash offers, can have significant legal consequences for buyers.
When submitting an all-cash offer is not feasible, we often see the following riskier offer strategies:
1. Property “Love” Letters: These letters are intended to tug on a seller’s heartstrings and convince a Seller that the Buyer intends to make good use of the home. In this market, we see very few who obtain an accepted offer based upon a “love” letter. And, these come with some risk. If the letter includes demographic information about the buyer (e.g., race, ethnicity, age, family status, etc.) and the Seller is “swayed” by the information, there may be a violation of the Fair Housing Act.
2. Waiving the Financing Contingency and/or Appraisal Contingency: If a buyer waives the financing contingency and/or the home does not appraise for the offer price (or the buyer loses the ability to finance the purchase of the property), this move can be risky. In such a situation, the buyer will be obligated to make up the difference in cash or they will risk losing their earnest money deposit (and sometimes the buyer can be sued for damages for failing to perform).
3. Submitting a BINSR Along with Your Offer and/or Waiving an Inspection: Recently, we have observed a trend toward submitting the Buyer’s Inspection Notice and Seller’s Response (a/k/a the “BINSR”) along with an offer. By making this submission, Buyers are signaling that they are not going to request any pre-closing repairs and that they have completed “all desired inspections.” Similarly, we have observed Buyers that flat out agree not to perform an inspection of the home. These moves are very risky and probably not worth the perceived upside. Waiving an inspection puts a buyer at risk of unknown structural, mechanical, or safety issues with the home, which may be very costly to a buyer. A better course is to procure an inspection and agree to not request repairs.
The residential real estate market is not likely to slow down anytime soon. As a result, it is imperative for buyers to keep in mind that waiving contingencies and giving up legal rights can have unintended, negative consequences. If you have questions about real estate or business law legal matters, you can contact me at firstname.lastname@example.org or call 602-533-2840.