LOS ANGELES—Waiving contingencies may be legal, but it is not advisable, according to Jill Epstein, a broker at Nourmand & Associates. Epstein, who focuses on luxury residential product, has seen more and more clients waive contingencies, like physical inspection and appraisals, to gain a competitive advantage, especially in this market. To find out why she is advising her clients away from contingency waivers and why this has become so popular, we sat down with her for an exclusive interview.

GlobeSt.com: Is it legal to waive contingencies?

Jill Epstein: It is legal to waive contingencies.  However, as a licensed realtor, I would advise against it. If a buyer chooses to have no contingencies, they have to acknowledge that they are acting against the advice of their agent. This is provided for in the residential purchase agreement.

GlobeSt.com: What are the benefits to the buyer and seller for waiving contingencies? What should both parties look out for?

Epstein: The reason a buyer would remove the physical inspection contingency or other due diligence contingencies is to make a stronger position for themselves in the eye of the seller, to get an accepted offer in a multiple-offer situation. The benefit to a seller is there are fewer opportunities for the buyer to back out of the sale.

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

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

Epstein: The most common contingency buyers elect to waive is the loan and appraisal contingency, often because these particular buyers compete with all cash buyers who do not require the contingency.

I do not recommend waiving the rights of reviewing and acceptance of the title report. It's important to read over the preliminary title report with any underlying documents and the natural hazard disclosure. By doing this you will know if there is any limited use on the property or if you have easements on the property. If you are buying a condominium, it's very important to look over the homeowner's documents and the financials of the condominium homeowner's association because it will clearly state restrictions regarding the use of your condo.

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

GlobeSt.com: Why is it becoming more common to waive contingencies and do you think this trend will continue?

Epstein: It is more common to waive contingencies due to the competitive state of the real estate market resulting from low interest rates. Inventory is low and the amount of all cash buyers has increased exponentially resulting in an increase with this trend.

For example, some buyers feel the need to waive a physical inspection contingency in order to be competitive against a developer who has plans to raze a property because they will not care about the condition of the home.

As far as the continuation of this trend, it depends on several factors: interest rates, inventory and the level of motivation of the buyers. If more inventory becomes available and there are fewer buyers around, it could result in becoming a buyer's market making waiving these contingencies a less likely practice.

Steady gains in the US economy have resulted in net positives for the multifamily sector—will this wave continue for the foreseeable future? What's driving development and capital flows? Join us at RealShare Apartments on October 19 & 20 for impactful information from the leaders in the National multifamily space. Learn more.

LOS ANGELES—Waiving contingencies may be legal, but it is not advisable, according to Jill Epstein, a broker at Nourmand & Associates. Epstein, who focuses on luxury residential product, has seen more and more clients waive contingencies, like physical inspection and appraisals, to gain a competitive advantage, especially in this market. To find out why she is advising her clients away from contingency waivers and why this has become so popular, we sat down with her for an exclusive interview.

GlobeSt.com: Is it legal to waive contingencies?

Jill Epstein: It is legal to waive contingencies.  However, as a licensed realtor, I would advise against it. If a buyer chooses to have no contingencies, they have to acknowledge that they are acting against the advice of their agent. This is provided for in the residential purchase agreement.

GlobeSt.com: What are the benefits to the buyer and seller for waiving contingencies? What should both parties look out for?

Epstein: The reason a buyer would remove the physical inspection contingency or other due diligence contingencies is to make a stronger position for themselves in the eye of the seller, to get an accepted offer in a multiple-offer situation. The benefit to a seller is there are fewer opportunities for the buyer to back out of the sale.

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

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

Epstein: The most common contingency buyers elect to waive is the loan and appraisal contingency, often because these particular buyers compete with all cash buyers who do not require the contingency.

I do not recommend waiving the rights of reviewing and acceptance of the title report. It's important to read over the preliminary title report with any underlying documents and the natural hazard disclosure. By doing this you will know if there is any limited use on the property or if you have easements on the property. If you are buying a condominium, it's very important to look over the homeowner's documents and the financials of the condominium homeowner's association because it will clearly state restrictions regarding the use of your condo.

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

GlobeSt.com: Why is it becoming more common to waive contingencies and do you think this trend will continue?

Epstein: It is more common to waive contingencies due to the competitive state of the real estate market resulting from low interest rates. Inventory is low and the amount of all cash buyers has increased exponentially resulting in an increase with this trend.

For example, some buyers feel the need to waive a physical inspection contingency in order to be competitive against a developer who has plans to raze a property because they will not care about the condition of the home.

As far as the continuation of this trend, it depends on several factors: interest rates, inventory and the level of motivation of the buyers. If more inventory becomes available and there are fewer buyers around, it could result in becoming a buyer's market making waiving these contingencies a less likely practice.

Steady gains in the US economy have resulted in net positives for the multifamily sector—will this wave continue for the foreseeable future? What's driving development and capital flows? Join us at RealShare Apartments on October 19 & 20 for impactful information from the leaders in the National multifamily space. Learn more.