Jill Epstein

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LOS ANGELES—Waiving contingencies may be legal, but it is notadvisable, according to Jill Epstein, a broker atNourmand & Associates. Epstein, who focuses on luxuryresidential product, has seen more and more clients waivecontingencies, like physical inspection and appraisals, to gain acompetitive advantage, especially in this market. To find out whyshe is advising her clients away from contingency waivers and whythis has become so popular, we sat down with her for an exclusiveinterview.

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GlobeSt.com: Is it legal to waivecontingencies?

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Jill Epstein: It is legal to waivecontingencies. However, as a licensed realtor, I would adviseagainst it. If a buyer chooses to have no contingencies, they haveto acknowledge that they are acting against the advice of theiragent. This is provided for in the residential purchaseagreement.

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GlobeSt.com: What are the benefits to the buyer and sellerfor waiving contingencies? What should both parties look outfor?

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Epstein: The reason a buyer would remove thephysical inspection contingency or other due diligencecontingencies is to make a stronger position for themselves in theeye of the seller, to get an accepted offer in amultiple-offer situation. The benefit to a seller is there arefewer opportunities for the buyer to back out of the sale.

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Once a buyer has waived or removed all contingencies, but forsome reason still does not close escrow, they would be in defaultof the contract and therefore would have to take the consequencesthat accompany it. The consequence could be losing their 3% depositfor liquidated damages. It takes both parties, the buyerand the seller, to sign the escrow paperwork and release themoney. It is not as easy as the deposit just being released to theseller due to default.

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GlobeSt.com: What are the different types of contingenciesand which should you never waive?

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Epstein: The most common contingency buyers electto waive is the loan and appraisal contingency, often because theseparticular buyers compete with all cash buyers who do not requirethe contingency.

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I do not recommend waiving the rights of reviewing andacceptance of the title report. It's important to read over thepreliminary title report with any underlying documents and thenatural hazard disclosure. By doing this you will know if there isany limited use on the property or if you have easements on theproperty. If you are buying a condominium, it's very important tolook over the homeowner's documents and the financials of thecondominium homeowner's association because it will clearly staterestrictions regarding the use of your condo.

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There are disclosures from the seller that will be given to thebuyer. They include the transfer disclosure statement and theseller's questionnaire. All these things could have an effect onthe property.

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GlobeSt.com: Why is it becoming more common to waivecontingencies and do you think this trend willcontinue?

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Epstein: It is more common to waive contingenciesdue to the competitive state of the real estate market resultingfrom low interest rates. Inventory is low and the amount of allcash buyers has increased exponentially resulting in an increasewith this trend.

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For example, some buyers feel the need to waive aphysical inspection contingency in order to be competitiveagainst a developer who has plans to raze a property becausethey will not care about the condition of the home.

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As far as the continuation of this trend, it depends onseveral factors: interest rates, inventory and the level ofmotivation of the buyers. If more inventory becomes available andthere are fewer buyers around, it could result in becoming abuyer's market making waiving these contingencies a less likelypractice.

|

Steady gains in the US economy have resulted in netpositives for the multifamily sector—will this wave continue forthe foreseeable future? What's driving development and capitalflows? Joinus at RealShare Apartments on October19 & 20 for impactful information from the leaders inthe National multifamily space. Learn more.

|

Jill Epstein

|

LOS ANGELES—Waiving contingencies may be legal, but it is notadvisable, according to Jill Epstein, a broker atNourmand & Associates. Epstein, who focuses on luxuryresidential product, has seen more and more clients waivecontingencies, like physical inspection and appraisals, to gain acompetitive advantage, especially in this market. To find out whyshe is advising her clients away from contingency waivers and whythis has become so popular, we sat down with her for an exclusiveinterview.

|

GlobeSt.com: Is it legal to waivecontingencies?

|

Jill Epstein: It is legal to waivecontingencies. However, as a licensed realtor, I would adviseagainst it. If a buyer chooses to have no contingencies, they haveto acknowledge that they are acting against the advice of theiragent. This is provided for in the residential purchaseagreement.

|

GlobeSt.com: What are the benefits to the buyer and sellerfor waiving contingencies? What should both parties look outfor?

|

Epstein: The reason a buyer would remove thephysical inspection contingency or other due diligencecontingencies is to make a stronger position for themselves in theeye of the seller, to get an accepted offer in amultiple-offer situation. The benefit to a seller is there arefewer opportunities for the buyer to back out of the sale.

|

Once a buyer has waived or removed all contingencies, but forsome reason still does not close escrow, they would be in defaultof the contract and therefore would have to take the consequencesthat accompany it. The consequence could be losing their 3% depositfor liquidated damages. It takes both parties, the buyerand the seller, to sign the escrow paperwork and release themoney. It is not as easy as the deposit just being released to theseller due to default.

|

GlobeSt.com: What are the different types of contingenciesand which should you never waive?

|

Epstein: The most common contingency buyers electto waive is the loan and appraisal contingency, often because theseparticular buyers compete with all cash buyers who do not requirethe contingency.

|

I do not recommend waiving the rights of reviewing andacceptance of the title report. It's important to read over thepreliminary title report with any underlying documents and thenatural hazard disclosure. By doing this you will know if there isany limited use on the property or if you have easements on theproperty. If you are buying a condominium, it's very important tolook over the homeowner's documents and the financials of thecondominium homeowner's association because it will clearly staterestrictions regarding the use of your condo.

|

There are disclosures from the seller that will be given to thebuyer. They include the transfer disclosure statement and theseller's questionnaire. All these things could have an effect onthe property.

|

GlobeSt.com: Why is it becoming more common to waivecontingencies and do you think this trend willcontinue?

|

Epstein: It is more common to waive contingenciesdue to the competitive state of the real estate market resultingfrom low interest rates. Inventory is low and the amount of allcash buyers has increased exponentially resulting in an increasewith this trend.

|

For example, some buyers feel the need to waive aphysical inspection contingency in order to be competitiveagainst a developer who has plans to raze a property becausethey will not care about the condition of the home.

|

As far as the continuation of this trend, it depends onseveral factors: interest rates, inventory and the level ofmotivation of the buyers. If more inventory becomes available andthere are fewer buyers around, it could result in becoming abuyer's market making waiving these contingencies a less likelypractice.

|

Steady gains in the US economy have resulted in netpositives for the multifamily sector—will this wave continue forthe foreseeable future? What's driving development and capitalflows? Joinus at RealShare Apartments on October19 & 20 for impactful information from the leaders inthe National multifamily space. Learn more.

|

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Kelsi Maree Borland

Kelsi Maree Borland is a freelance journalist and magazine writer based in Los Angeles, California. For more than 5 years, she has extensively reported on the commercial real estate industry, covering major deals across all commercial asset classes, investment strategy and capital markets trends, market commentary, economic trends and new technologies disrupting and revolutionizing the industry. Her work appears daily on GlobeSt.com and regularly in Real Estate Forum Magazine. As a magazine writer, she covers lifestyle and travel trends. Her work has appeared in Angeleno, Los Angeles Magazine, Travel and Leisure and more.

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