Mortgage Contingencies

If you do not have the cash to pay for the apartment, then you need a mortgage contingency.

IMO, do not waive your mtg contin clause. I think brokers/sellers are afraid that bank will reneg on the mtg contin clause. These days, financing can be a mine field. Maybe this is not a good environment for buying.
Hopefully Sunny Hong (a B of A mtg broker) posts & gives us her point of view.

I mean the bank will reneg on your pre-approval or reneg on the loan.

This is a non-negotiable point unless you are truly willing to lose your deposit/escrow. Consult with your attorney (hopefully one who does A LOT of real estate and not one who dabbles--you get what you pay for). Sadly, you have to move on because you cannot give in on this one.

That said, you can (as you probably already are) do all possible to convince seller of your worthiness of the risk the SELLER must bear (i.e., you not getting financing and having to put place back on market). Outline you outstanding financial credentials and why you are likely to be approved. Explain how your bank has previously been willing to finance purchases in the building (your lawyer can help you determine that). Provide evidence of your stable employment and income, your prior responsible handling of home ownership, your credit score. Be creative, and be forthcoming.

If you actually have a more checkered past or can't offer a lot of this because it doesn't exist, then sellers may reasonably be viewing your likelihood of getting financing as high risk and there is little you can do to counter that if their concerns are justified by your situation.

in my experience, when working with buyers, the only time i've seen a mortgage contingency NOT be placed in the contract in this market is when there are multiple offers and you want yours to stand out, knowing full well that you are fine to handle the purchase on your own if you don't get a mortgage.

i find it a bit out of touch (i have to believe from the seller's not the broker's standpoint, by the way) to insist on no contingency in this credit climate.

DO NOT SIGN MORTGAGE CONTINGENCY!!! We did that and our apartment appraised 315,000 below what we were in contract for.. Now they are keeping our deposit because the apartment didnt appraise!!! We were WELL qualified as well so at least have the appraisal in contract..It is crazy for anyone to ask for that in this environment and it would be crazier for you to sign it!!!

Is this a new construction building? They are the ones that usually require the no contingency clause. I would not under any circumstances in this market allow a no mortgage contingency clause in the contract. I am sure someone will be willing to sell you an apartment without the clause.

This is such bullshit.

I ran into this as a newbie buyer several years ago when I tried to buy a co-op in Brooklyn. My lawyer brought it to my attention and explained to me what the "mortgage non-contingency" clause meant. Appalled, I called the seller's broker and asked her to remove the clause before I'd sign. She said it was a standard clause, that the seller had no intention of keeping my deposit, and what was I worried about, I was guaranteed a mortgage anyway. I responded there are NO guarantees in anything, and if the seller truly had "no intention" of walking away with my deposit, then why would she object to removing the clause? The broker remained firm. I walked away.

Unless you can go all cash, you'd be nuts to not have a contingency.

Gramercy, do you see a pattern in the responses here? 100% you need the contingency clause or you cannot enter the contract. This is not a point that is really debated, that there are many views on, that reasonable people differ on. You need it. Period. The ONLY exception is if you have the cash and are willing to use it to fund the entire purchase and are indifferent to that prospect. No matter what any broker tells you, that is the ONLY exception.

Thanks, everyone. We told the broker we need to have the contingency clause, or we would not be able to move forward into contract. We'll see what they say. (the apartment has been on the market for 15 months).

Apt's been on the market for 15 mos & they reject you due to a contingency clause. What's really going on here? How much financing does the bldg allow? Is there fear that your bank will not approve your loan after seeing the bldg's financials? The Bd only wants all cash buyers?

Never be afraid to walk away. There are plenty of other apartments.

Be sure to let us know what happens!

Just to throw one more wrinkle in here (which I think dwell identified) -- I had a situation recently where a bank rejected the building. My finances were entirely in order, but the bank didn't like something about the building, and so denied the loan. (Thank goodness for the contingency.)

If the seller is trying to force you into not having a mortgage contingency, please bear in mind that it's not just a question of whether you're qualified. Problems can arise on either side of the deal these days -- giving up the mortgage contingency just means that you're on the hook for just about any problem with the loan, including problems caused by the seller or the building.

Not to assume the worst, but the seller may even know about a problem that they aren't telling you about -- that would be one reason for them to insist on not having a mortgage contingency. If they've been on the market for 15 months, and they'd still rather keep looking for a buyer than give you a contingency...well, you can never know for sure, but that would certainly give me pause.

We told our seller that we weren't waiving and they said OK.

Sounds like a seller that has been burned already.
If it's a deal breaker consider a reduction in the purchase if that's the demand of the sale.
If your a qualified buyer and it's a deal not a steal be very careful.

Interesting - as a prospective all cash buyer for a 1 BR coop in Bklyn, we are repeatedly told that "all cash" is of no real benefit to the buyer. Hence, no improvement in our bargaining position is warranted. On the other hand, sellers are demanding the absence of a mortgage contingency. Anyone see a theme here?

"On the other hand, sellers are demanding the absence of a mortgage contingency. Anyone see a theme here?"

Sounds like a great way to make some extra cash!

Put your condo on the market, knowing full well that no bank would approve a mortgage. Force the prospective buyer into a contract with no mortgage contingency. Prospective buyer rejected. You keep the deposit.

Repeat.

Repeat.

Repeat.

Retire!

i think sellers are getting a bit excited about the pick-up in activity; some may be getting overzealous in terms of thinking they could start dictating terms that may be a bit ahead of their time. certainly, if there are multiple offers on the table, the seller can call the shots. otherwise, i don't see this behavior as being sustainably supported by market fundamentals.

as for an all cash bargaining position, I'd say it depends on each seller. for some it could be everything, for others, not.

just saw the Sopranos episode where Tony and Carmela go into contract on the beach house but then they are going to get separated so he wants out of contract. This is done by blasting Dean Martin from a boat docked outside the sellers' house all night. Brilliant!

Gramercy, hi, I wrote a response to the below question which I believe is very relevant, I wasn't sure how to attach it, however I am giving you the question so you can look it up.
It has some possible solutions in the answer.
How to prove mortgage is attainable (by zeet)
14 comments (recent comments) (hide comments) updated 2 days ago

Thanks dwell. By the way, I'm a 'he.' No worries, I get that all time.
I would not go with the no mortgage contingency unless you can end up paying is cash. Although 99% of the time I can tell whether a borrower would get financing, there's always that 1% chance something that is completely out of your control could come up. Depending on your loan profile the odds could be in your favor but the question is, do you want to take that chance. Some people will, some wont. They wont even accept a 30 day or 45 day mortgage contingency? I think if the unit sits on the market for another 30 days, they may come knocking realizing they couldve at least given you a 30 day contingency to get a mortgage instead of having wasted their time trying to sell the unit.
sunny.hong@bankofamerica.com