At just about this time last year, the Northern Virginia Association of Realtors Board of Directors approved a new form entitled, “Buyer’s Acknowledgement of Adverse Consequences.” (the “Form”). The release of the Form could not have been more prescient.
Lack of inventory and low interest rates have caused overwhelming demand for homes with buyers competing against multiple offers for properties they desire. In such frenzied markets, buyers often become aggressive with the offers made on listings in hopes of securing a ratified contract.
There are numerous, creative ways in which buyers can attempt to make their offers more attractive. Some examples include, but are not limited to, submitting an Escalation Addendum or highest and best offer, waiving contingencies such as financing or home inspection, offering to pay the seller’s grantor’s tax, offering a free post-settlement occupancy, allowing the seller to leave personal property that the buyer will be responsible for, limiting or removing the seller’s potential liability under the Wood Destroying Insect provision and/or the Title provision of the Virginia Residential Sales Contract, offering a straight up credit to the seller, and flexible closing dates.
Strong demand and low inventory may create the necessity for such creative contracts; however, this does not mean it doesn’t come without potential consequences. Buyers lose significant protections upon waiving contingencies, subject themselves to potential monetary payments by limiting seller’s exposure under certain contract provisions or more obviously agreeing to pay for what are otherwise seller expenses. The Form contemplates an offer being submitted without a list of predefined contingencies from which to select, as well as an “Other” category for flexibility purposes. The Form states that “Buyer’s decision regarding these and other contract terms may lead to potentially adverse consequences.”
The Form is not required and does not become part of the contract, however, in high demand, low inventory markets that force buyers to be “creative”, one may wish to consider having their buyers sign the Form for each offer they make.
*Disclaimer: This article is not a substitute for specific legal advice and the author does not advocate for any particular contract language or provisions.