The market conditions advisory disclosure, also known as the MCA, is provided as one of many disclosures from the California Association of Realtors. The latest version of the MCA was revised in November 2011.
The MCA consists of two pages that is provided as part of the seller disclosure packet during an accepted contract.
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Market Conditions Advisory Disclosure Breakdown
The market conditions advisory disclosure discusses the potential risks with the ever changing real estate market.
Real estate markets are cyclical and can change over time. Predicting any future market conditions is next to impossible.
Sellers market, aka a “Hot” market, is typically noted with the following conditions:
- More buyers than sellers
- Increased competition for listings
- Buyers offers may offer more than planned
- Buyers may eliminate certain contingencies
Buyers market, aka a “Cool” market, is noted to have the following conditions:
- More sellers than buyers
- May cause prices to drop or level off
The amount of foreclosures and short sales in a particular area is very difficult to predict. It is advised that buyers take this into consideration when purchasing any home, because it can affect the valuation of a property.
There are inherent risks when writing offers at a particular price or if they remove certain contingencies. It is always advised that Buyers seek consultation and deliberation with appropriate professionals that can help determine a Buyer’s level of risk.
Brokers may provide buyers with information like comparable sales data that can be used to determine a price to offer for a property. However, it is important for buyers to remember the following:
- Data provided is often delayed and prices may change
- Buyers should be comfortable with the price they are offering or countering
- If the offer is accepted, the property’s value may not increase and can decrease.
- If the offer is accepted, there is a possibility of “Buyer’s remorse”.
- If the offer is rejected there is no guarantee that another similar priced property may exist.
- If the offer is rejected, buyers may not be satisfied that the amount offered was right.
Buyers are responsible for determining the price they wish to offer for a property.
To make offers more attractive, Buyers may remove or shorten contingency periods. Doing so is acting against the brokers recommendations. If a Buyer chooses to write up a non-contingent offer, these are some of the contractual rights they may be giving up:
- Loan Contingency: If you cannot obtain a loan, and as a result, the buyer cannot purchase the property, they may be legally in default under the contract and can be required to pay damages or forfeit their deposit.
- Appraisal Contingency: If the appraiser does not believe the property is worth the agreed purchase price, the buyers lender may not loan the full amount needed to acquire the property. This can result in a shortage of funds to purchase the property. And if the buyer does not purchase the property they can be subjected to pay for damages or even forfeit their deposit.
The Seller is not obligated to reduce the price to match the appraised value.
- Inspection Contingency: If the buyer disapproves the condition of the property and cancels, they may be legally in default under the contract and can be required to pay damages and or forfeit their deposit.
However, even if the inspection contingency is removed, the Seller can still be obligated to disclose material facts about the property. And in some cases that information gives the Buyers a period of time to review and cancel if they so choose.
Broker recommends that buyers do not write a non-contingent offer. If the Buyer chooses to do so, the broker recommends:
- Reviewing all available Seller reports, disclosures, and information.
- Inspect the property with an appropriate professional.
- Buyer to assess their financial risk with an advisor.
Buyers may write offers on multiple properties even though the Buyer intends to purchase only one. This scenario typically occurs when placing offers on properties that are listed as short sales with long approval processes.
Buyers can be obligated to multiple sellers if their offers are accepted. Buyers are advised to disclose that they are writing multiple offers with the intent of only purchasing one. If they fail to do so and cancel without using a contingency, the Seller may claim the Buyer is in breach of contract.
Sellers are responsible for determining the asking price for their property. When determining the price they should make sure they are comfortable with the asking price and the price they are willing to accept.
There are no guarantees that the price being asked, or the price at which they agree to sell the property for is highest attainable price for their property.
When the MCA is used
Buyers and Sellers may see the Market Conditions Advisory in their disclosure packages. This is dependant on if the Broker chooses to use this disclosure as one of their required documents.
Signature Requirements for the MCA
Buyers and Sellers are required to sign and initial the MCA.
Page 1: Buyers & Sellers Initials
Page 2: Buyers & Sellers name, signature and date of signature
The MCA in our opinion is one of the easiest disclosures to understand and complete that CAR provides. Be sure to check that each party has initialed the first page, signed the second page and that the property address is listed at the top of page two. .
Disclaimer: This article is meant to educate, inform, and comment on a document that is protected by the United States copyright law. This article is only our interpretation of the subject document. We advise the reader to consult their broker or agent on any questions they may have. The reader is also advised to reach out to the California Association of Realtors for any additional information.