Mortgage Contingency

Test them. Say no.

This is something that should probably be negotiated as part of the offer as opposed to in the contract details. However, it's obviously too late for that, so...

It sounds like you're talking about new construction. If so, you're faced with the risk that there will be a significant change in underwriting standards or that the appraisal won't come in near your purchase price. Personally, that's not a risk I would take unless the price was substantially discounted to reflect the added risk as well as the period of time your deposit will be tied up. I walked away from a new construction deal earlier in the year on this basis. What you do is up to you, but there are definitely some developers offering mortgage contingencies at this point.

If we're not talking about new construction, I would imagine that mortgage contingencies would be absolutely expected and acceptable in nearly all deals.

If this is not new dev:

- if condo - find out the % of renters in the building. The Bank may decide to decline if the % is too high
- if condo - risky, the Bank may find several issues with the co-op. Eg
- finances of the board are a mess/missing
- pending lawsuits against the co-op

If you loose your job, you may run into problems contractually. In this environment, unless you can pay all cash, its not worth the risk *at this time*

I agree with jordyn, this is not the time to be signing new dev w/o a mortgage contingency.

"the appraisal won't come in near your purchase price"

is spot on.

BTW I did new construction once, and the builder went bankrupt. I came out fine in the end b/c it was a rising market, but if you're on the other side of it, caveat emptor.

It's HELL.

I would recommend that you insist on the the contingency being put back in. There are way too many things that could happen btw signing the contract and your closing. Building risk is just one. I'm talking about things you may not have any control over...everything from weird financial market gyrations to attacks on the city. I'm not sure this is just a new dev risk...

It's not just a new dev risk, but it's particularly acute in new developments because there's generally a much longer gap between signing the contract and closing, which means the probability of any of the various bad things that could happen increases significantly and you can't get a useful appraisal to lock up a mortgage commitment in advance.

jordyn is spot on. I know that people don't like Miami comparisons (though they're wrong) but go here:

http://buybeach.com/condos/condo_mls.htm

choose Bentley Bay, then look at any apartment with the extension xx04.

I sold 1704 almost 3 years ago for $1 million, right before Wilma hit. Now you have 1904 wanting $1.1 million, and 1804 wanting $979,000, and 2004 wanting $750,000.

Do you see what happens when people will not accept reality? 2004 hasn't been able to get $750,000 for 3 years, yet the apartment BELOW it wants $1.1 million, or 50% more.

Beware of a falling real estate market - it is not rational.

DO NOT sign any contract w/o a mortgage contingency.

If you can't afford to do the deal without financing in case things fall apart, you have no business waiving the mortgage contingency.

thanks all, I had no intention of dropping the MC, but just wanted to test the environment and you sealed it for me . . .

BTW -- this is not new dev, it is a condo flip. not too worried about the appraisal, as we got the price down to about 15% below other comps in the bldg, but considering the mkt environment, and the fickle nature of banks, don't think it is worth the risk.

Mtk conditions are crazy, and banks can change the lending standards at any time or demand certain things you are not prepared for or unable to fulfill, having said that you need to insist on a MC, or be prepared or comfortable doing all cash (just in case)

whats the typical scope of protection that a mortgage contingency offer.. is it an automatic out for the buyer? ie., i get a lower appraisal = higher LTV = higher, but not unaffordable rate. is it a material change, or will ANY change absolve me from the contract?