The San Francisco housing market is roaring into summer, and two things are clear: It’s very much a seller’s market for single-family homes and many condos, and a majority of buyers are submitting non-contingent offers on properties.
What this means is that in a competitive situation, many buyers will waive all sale conditions—or “contingencies”—in order to send the message that they are completely confident they’ll complete the purchase. In other words, these buyers will assume the risk of waiving inspection, appraisal, and loan contingencies to make their offer as clean as possible. If the buyer wants to cancel the contract and has no contingencies, the sellers can make a case for retaining the three percent deposit sitting in escrow. (Follow this link for more on the risks of non-contingent offers).
I’ve represented many buyer and seller clients this year, and a majority of the offers in these scenarios had no contingencies. My colleagues are also routinely reporting this type of activity.
Buyers who go non-contingent typically have very solid down payments—often more than 20%—and have been fully preapproved for a loan, with the lender only needing to approve property details once in contract. Additionally, the buyers have strong cash reserves that they can use to make up for an appraisal shortfall or handle unexpected repair or maintenance items during the course of their ownership.
If you’re a buyer considering taking the non-contingent risk to better compete, definitely consult your lender for his or her opinion. The lender is really the most appropriate party to advise you about this (not your Realtor). If you can’t go non contingent, you’ll need to scout out less competitive offer situations—or wait until the market cools down a bit.