No Contingency Purchase Offer

Most Silicon Valley home buyers are well aware that a no contingency purchase offer is more appealing to a home seller than a contingent purchase offer. A prospective home buyer should still think carefully about the risks they face when making a no contingency purchase offer.

Probably the most significant risk is not being able to get a mortgage. This has become a greater risk because recent disastrous wildfires have led many home insurance companies to withdraw from the California home insurance market. If you don’t have fire insurance, you probably won’t be able to get a home purchase mortgage.

In early September 2023, Senator Bill Dodd texted “Deal is dead” referring to negotiations between legislators, the state insurance commissioner, and insurers. Agreement to changes that would have allowed insurers to increase rates if they guaranteed they would cover certain percentages of properties in high wildfire risk areas were close to being completed. However, a secret recording of a lobbyist was revealed containing a boast about “trying to jam a bill in the last three weeks” of the state’s legislative session. Consumer groups were not present during negotiations. They immediately raised alarms. The negotiations failed to be completed by the September 14 legislative deadline. Legislators have stated their belief that an agreement can be reached in the next legislative session.

The insurers have complained that their applications for rate adjustments have taken “an inordinate amount of time” when submitted to Insurance Commissioner Ricardo Lara’s office.

On September 21, Governor Gavin Newsom signed an executive order urging Insurance Commissioner Lara to take swift action.