Make no mistake about it: The housing market nowadays is a seller’s market. It is basic supply and demand; there is a dwindling housing inventory, and people are more willing to spend money on homes. When you combine those factors, you get high demand, leading to not just higher prices but desperation by many homebuyers.
The government even raised interest rates to very high levels in an effort to curb spending. But that may have had the opposite effect; homebuyers with good mortgage rates are now simply holding onto their homes to avoid buying a new home at the raised interest rates. That has led to even less housing inventory on the market.
The desperation by buyers has become so great that many homebuyers are resorting to waiving basic and important legal rights in a real estate closing.
No Inspections Needed?
For example, many homebuyers are outright waiving inspections or agreeing that a bad inspection will not allow the buyer to back out of the deal, as it normally would. Buyers could potentially be left with costly problems and a “Hobson’s Choice” of either taking a home with significant and expensive repairs, title problems, or code violations or not taking the home and forfeiting the deposits.
No Loan Contingencies
Many homebuyers are agreeing to waive contingencies. Contingencies are things that have to happen for a real estate closing to occur but which are unknown at the time of the contract. A common one is financing; standard real estate contracts say that if a buyer cannot get financing, the buyer can walk away from the deal with the deposit.
But in an effort to coerce sellers to sell homes to them, many buyers are agreeing that even if they do not get financing, the seller can keep the buyer’s deposit.
Buyers are putting themselves on the hook in the event appraisals come in too low. In most real estate closings, the buyer can only get financing for the amount that the home appraises for. If a home appraises for too little, the buyer cannot get the financing to pay the seller’s asking price.
Normally, this would mean the financing contingency fails, allowing the buyer to walk away from the deal. But many buyers are agreeing that they will pay, in case, the difference between a low appraisal and the asking price of the home in order to “make up” the gap in the event the property appraises too low and financing is not available for the entire asking price.
Many sellers need time in the home, even after the sale, to give them time to find a new home–after all, there are not that many houses out there. Again, to convince sellers to sell property, many buyers are allowing sellers to remain in their homes, even after closing, for periods of time, rent-free, giving sellers the time needed to find new property.
Contact our New Jersey real estate law and closing attorneys at The Law Office of Agnes Rybar LLC today to make sure you are not taking unnecessary risks in your real estate closing.