Oregon REALTORS® Forms have a “due diligence contingency” rather than an “inspection contingency.” The forms were designed to allow the Buyer to look into all matters that impact their desire to purchase the property and to allow the Buyer to terminate if those due diligence investigations turn up something the Buyer disapproves. Sounds great in abstract, but what does this really mean? It means the Buyer can reliably recover their earnest money when they learn that something is amiss with the property, even if the problem is not related to the property’s physical condition or physical infestations. Make no mistake, in Oregon REALTOR® Forms, a Buyer can still do inspections, but they can terminate during the due diligence period for more than just inspections.
For example, imagine a Buyer who wants to purchase an investment property on the beach with bright shiny plans to turn it into a cozy beach house they can rent out to the tourists who flood Lincoln City every summer. The Buyer finds a perfect little house and they tell their agent to put in the offer. A few days into the transaction, the Buyer tells the agent about how lovely the house is and how the view is just going to bring tourists streaming in from everywhere. The agent, a Lincoln County local, sheepishly notes that the county suspended the processing of short term rental licenses in August of 2023. The Buyer’s short term rental dreams are crushed until at least August 2024, assuming the county doesn’t put another moratorium in place. The Buyer no longer has the original intent to purchase, the property no longer meets their needs. Sure, they may want to buy a beach house for personal use, but if they were planning to cover the mortgage with some of the income or weren’t planning on having this purchase leverage them the way it would, the transaction may become non-feasible. Rather than force them to stay in it or get an inspection as a pretext requirement to unlock their right to terminate, the Oregon REALTOR® Forms just let that Buyer terminate during the due diligence period. For any reason. As long as it’s within the diligence period.
There can be dozens of other reasons to terminate that are not connected to the inspections, but are valid and surprisingly commonplace. Some examples include:
- Buyer learns the neighbors are aggressive or irritating;
- Buyer learns that region is in decline [e.g. learns that the city is in a budget deficit that will likely result in either loss of services or higher property taxes in the near future]
- Buyer gets a job elsewhere in the state/nation/world and no longer needs this property;
- Buyer has other, external loss or gain that removes the need to purchase the property [e.g. death of a spouse or child, need to caretake an aging parent in another location, sudden disability making stairs a non-starter; marriage, pregnancy or adoption now requiring a bigger house than originally intended, etc.]
- City ordinances or resolutions run counter to Buyer’s intended usages [e.g. City puts in a dry ordinance and Buyer is not dry, not likely to happen, but Monmouth Oregon was the last dry municipality in Oregon until 2002, so we have a historic taste for dryness as a state.]
There are practically endless reasons why a Buyer may no longer wish or need to purchase a property. The Oregon REALTORS® sale agreements allow those Buyers a wider window to terminate, recognizing that, sometimes, the perfect house may not be the perfect house right now.