Paying Cash?

doesnt matter, seller gets paid by buyer motgage company anyways. may only help is seller is panicky and wants to sell and close quick.

I never did understand what the benefit of an all cash deal was accept allowing a quicker closing but than again anyone can say an all cash deal and the seller would get all cash from the mortgage company as opposed to an individual. In NYC most deals are done on a no mortgage contigency basis anyway so once again accept for a few weeks difference why would anyone lower their price on an all cash basis unless they were sitting on a white elephant.
Now if I had a buyer who offered me all cash vs one that offered me a higher price with a no mortgage conigency I would favor the one with a no mortgage contigency since I'm getting my money anyway. If they back out I get to keep the down payment.

No discount. Mortgage contingencies are getting more and more rare, and anything more than 30 days is almost non existent

Doesn't mean a difference at all unless you want to close quickly.

mortgage contingencies rare or non-existent? on what planet? i'm a real estate attorney at a manhattan law firm, and i would estimate that 95% of all contracts (on transactions that are being financed) have mortgage contingency clauses. we represent both buyers and sellers and see probably 25-30 contracts per week. as a buyer, its crazy to sign a contract without one, and as a seller, its completely unreasonable to ask a buyer to put that much money on the table when there is no guarantee the buyer will be approved for the amount they are requesting to cover the cost of the apartment. this is especially true in manhattan where many buyers are really reaching to afford the apartment. Despite the perception of the media most people buying apartments in manhattan are not I-bankers bringing home a $1 million+ each year.

to anonymous (RE attorney):
Could you give us more details on the types of buyers you are seeing in Manhattan for the price ranges 400K-800K. I'm curious what types of buyers are really out there

i'm guessing: rich white people, maybe even slightly attractive rich white people

From www.Bluepearl.com
"Section 10 – Crucial considerations in a market where most contracts have no mortgage contingencies.
Any first time buyer in New York City is going to be in for a shock when they learn about this aspect of the typical purchase contract. And those of you who have bought property elsewhere are going to be totally dumbfounded. You see, in the rest of the civilized world, virtually all real estate purchase contracts have what is known as a mortgage contingency clause.

This means that normally, for the 75% of buyers that do need to obtain financing, a clause is inserted in the purchase agreement that states the contract is contingent on the buyer obtaining a mortgage (or share loan), usually within 45-60 days.

And if for any reason, after making a good faith attempt to obtain financing, the buyer is denied a loan by a bank or other lending institution, she can cancel the deal and receive her deposit back. The typical deposit required for a binding real estate contract in New York State is 10% of the purchase price (though technically this is negotiable). This amount is paid by the buyer to the seller’s attorney at the time the contract is signed. The deposit is held in an escrow account until dispensed to the seller at closing – the day the property actually changes hands.

For the past 3-4 years, purchase contracts typically have had no financing contingencies. This has become the norm in Manhattan real estate. Contingent offers are not seriously considered by many sellers. Why? Demand for apartments has been so strong, that sellers can insist on guaranteed performance of the contract, whether you need a mortgage or not. With this type of contract, if you can't show up at closing with all of the money required, the seller can keep your deposit as "liquidated damages".

The theory, here, is that by signing a contract and taking his property off the market (typically for a couple months at the minimum), the seller has in good faith forgone other potential opportunities to sell free of contingencies. And if you can’t come through with a mortgage within an agreed upon time frame, the law says you violated a binding agreement, implicitly costing him time and money. And thus he has sustained damages and is entitled to collect your deposit as compensation.

As we've said, this isn't the view anywhere else, including most of the other Borough's and Long Island for example, but it’s now the way it’s typically done in "the City". Are there exceptions? Yes, but they are still relatively rare. There are always a few apartments that don’t interest most buyers. Owners of these may allow a mortgage contingency. You can always try, but be prepared for rejection. Especially for units that remain in demand.

So what does it all mean? Unfortunately it's simple: if you have to borrow money to fund your purchase, you probably won't be able to buy unless you are willing to risk losing your 10% deposit. We’ll see how you can reduce this risk to a very low number, but a risk that is "next to nothing" is still not zero. For many borrowers, it will take some guts to buy in this town. Let’s see what steps you can take to calm the butterflies and give you as easy a ride as possible.

Your strategy is fairly straightforward. Obtain loan pre-Approval. Look at the contingencies. Satisfy yourself that you can meet them. At this point you should be 99.9% certain that the bank will lend you the money. Then have the courage to take the 00.1% risk that something could come up that blocks funding of your loan, and make a no-contingency offer anyway. Otherwise, the simple reality is you probably won’t have a chance to buy the apartment you really want in today's market.

I agree with the above post and if I were a seller there would absolutely not accept deal with a mortgage contigency. That to me is strategy for someone to change there mind and back out of the deal.

Bought in Novemeber, no mortgage contigency clause in our contract.

Wow. Sorry, but, as stated above, mortgage contingency clauses are standard in NYC, unless your lawyer is stupid. 45 days is the norm. When the Manhattan RE market was hot, however, many new constructions removed the mortgage contingency clause, on the precise theory that the super long post provided. The seminal case on point is Lawrence v. Miller.

In response to an earlier post, the advantage of cash relates to tax considerations.

Sorry RE Lawyer, but in a sellers market, people do not take their homes off the market unless they are fairly certain that the contract will close. Buyers don't have much leverage to insist on a contingency clause. If you do, pish tosh...there is someone standing right behind you with a back up offer who won't insist on one.

I just sold my condo, and wouldn't accept a mortgage contingnecy. I bought a co-op with no mortgage contingency. Like the way of the dodo.

To the real estate attorney...do you specialize in the low income market?

How about co-ops which require large downpayments, shouldn't these be discounted to reflect this and therefore be a better buy for a cash buyer?

to comment #13, get out of 2004 and welcome to 2007. we are not in a sellers market anymore. sure, prices haven't dropped, but you can forget about a bidding war that ends up 5%above asking. that is a sellers market.

i'm the original RE attorney. i'm only telling you what i see and how i advise our clients. if your trying to convince me that our theory for negotiating contracts is outdated or unreasonable, please cite a better source than www.bluepearl.com.

i'm an attorney as well and we see about 40 new contracts and day. mr RE attorney is right about the contingency clause. you want to have this one in your contract.

Only stupid attorneys will not include a mortgage contingency on their client's contract. I am about to close on my new condo this week and my lawyer said that's simply to protect me, as a client. Contracts without mortgage contingencies are usually written for individuals agreeing to pay 100% cash without financing. These individuals are usually your foreigners, wealthy high income families, etc.

#19, that is just not true. We sold a house in Westchester and picked an offer based largly on the fact they waived the mortgage contingency (the buyer was financing 90%). And when we bought in the city, we had to waive the contingency to get the place, eventhough we bought a condo and financed 90%. Now, we were quite sure we could get a mortgage as we could have borrowed twice what we were looking for, but we had to waive it nonetheless. It's nice to have, and the rest of the country sees it as essential, but NY seller's take a different view.

***my wife and i were told by the seller agent to waive the contingency when we made the offer, didn't seem like a big deal at the time. later we went with another apt. now i found out (courtesy of these forums) that the building we first looked has no financial records and the treasurer is "missing" and that people that signed contracts cannot get mortgages. so i guess they are screwed until their lawyers get their deposit back, if they can.

#21, you would NOT have been screwed by a lack of a mortgage contingency in this case. You do due diligence and review financial records BEFORE signing a contract. So if the building has no financial records, the problem is not the mortgage contingency per se, but the fact that the buyer (or their lawyer) didn't do any dd before signing.

To RE attorneys: If I'm pre-approved is there any reason why I would still do a mortgage contingency?

Another thing to be concerned about is your appraisal coming in low and having to come up with extra money at closing.

You can be pre-qualified and still not get a mortgage for many reasons, some of which are listed in #21 -- i.e., because of some negative factors, the bank won't give you a mortgage for that particular building. This can especially be a problem if the apartment is appraised for less than the value of the property. A low loan-to-value ratio means there is not enough value to secure the bank loan.

I would not buy and apartment without a mortgage contingency. You had to give them up when it was a sellers market. I walked away from a deal because the seller insisted upon me giving it up. Never regretted it.
As the buyer, you lose if:
Appraisal of the apartment comes in lower than the purchase price.
You do not get approved for the mortgage.
The co op or building is not eligible for a particular lender. Many lenders don't do co op loans.

To return to the original question, your all cash money will allow you to buy in a co-op building which mortgage lenders won't approach (perhaps because of a owner/occupancy rate of less than 50%). This opens up a whole segment of the RE market that is underpriced (because most people get mortgages). Hence your cash in pocket can be used to get some leverage. Don't forget that your sale price -- when you move along -- will be depressed for the same reason.

About the owner occupancy rate of less than 50% - I thought that co-ops were very stringent about subletting. Are you talking about buildings perhaps at the lower end and/or not so strongly against subletting & now their leniency is costing everyone dearly. Please explain. Thanx.

Hey -- yes, there are buildings that are not park ave palaces but are hardly low end (village/e. village/soho locations), where owner occupancy is low and financing difficult, resulting in lower purchase price. They pop on the market sometimes. And having a load of $$$$ ready to go is obviously of advantage when they do.

Every co-op has its own subletting policy, and some are quite free n easy about it. And it doesn't cost you dearly if it means you can pick up a place cheap.

Outside of this, being able to pay cash instead of financing (per the original poster's question) isn't of much advantage.

The 'costing dearly' comment referred to the current owners of these co-ops since, apparently, their boards' policies has depressed the resale value of their units. I guess that's the upside to the conservative, strict board's policies; it protects the value of the building and its' units.