Should You Waive Your Mortgage Contingency in NYC? (2019) | Hauseit®


Waving the mortgage contingency clause when buying a property in New York City can sometimes be the only way to compete with all-cash or non-contingent buyers. First let’s start with the basics: What is a mortgage contingency clause in real estate? A mortgage contingency clause in a New York City real estate contract gives the buyer the right to back out of a deal and receive back the contract deposit if he or she is unable to obtain financing within a specified period of time. If a buyer’s offer is not mortgage contingent, it means that the buyer is still responsible for coming up with a remainder of the purchase price at closing even if the bank does not agree to provide a loan. Sellers prefer non-contingent offers because they have a higher certainty of going through. Because of this, sellers are typically willing to be more flexible when negotiating with a buyer whose offer is non-contingent. This means you may be able to negotiate a lower purchase price if you are an all-cash or a non-contingent buyer. Why do buyers in New York City often waive the mortgage contingency clause? Buyers often waive their mortgage contingency as a way of making their offers stand out against a crowded pack of other bidders. A seller in New York City will usually prioritize offers in the following order: All-cash, non-contingent offers All-cash, contingent offers Financed non-contingent offers Financed, contingent offers What are the risks of waiving the mortgage contingency clause on a New York City real estate deal? If you’re about to make an offer in a competitive bidding situation, waiving the mortgage contingency clause is not something you should consider lightly. Failing to obtain a mortgage within the contingency period, or allowing the contingency period to expire will eliminate your right to recover your deposit and back out of a deal. However, the real reason why you should think carefully before waiving. Your mortgage contingency is that there are a large number of unpredictable variables which could derail your mortgage application. If your lender happens to suddenly change their underwriting criteria or you suffer a job loss, you could be on your way to an unexpected mortgage rejection. With that said, if you happen to have a backup source of proceeds such as a family member then it’s less risky for you to waive your standard mortgage contingency. How can I minimize my risk if I’ve decided to submit a non contingent offer? If you’re already pre-approved by a major bank and have confirmed with them that your building is on the list of approved buildings, the chances are remote that you will not receive a loan. If the bank has approved you but not your building, They should be able to tell you whether or not the building will be approved before you commit to signing the contract. Looking to buy or sell a home in New York? Learn how you can save on commission and closing costs at www.hauseit.com

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