Showing posts with label mortgage contingency. Show all posts
Showing posts with label mortgage contingency. Show all posts

Monday, May 13, 2013

No mortgage contingency clause in that contract?

For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us. We can help. Located in Fairfield, NJ, we are the title insurance agent that does it all for you.

Buying a home requires a well conceived and written agreement between the parties. The contract will contain terms of the purchase as it relates to price, home inspections, and the all important mortgage contingency clause.  With respect to the latter, if the buyer cannot obtain a mortgage, the deal is off.

But a bustling seller's market has brought a new wrinkle to real estate land - the no mortgage contingency offer.  The New York Times reports,
In a housing market starved for inventory, buyers are stepping over one another to bid on desirable properties. But a high bid may not be enough — sellers are also seeking offers without mortgage contingencies.
But the combination of a competitive market and a difficult lending climate has made sellers in New York less amenable to such conditions. They want noncontingent or all-cash offers.
Why would a buyer agree to this?  Well, the obvious answer is that she wants the home and has a high level of confidence that a mortgage on her terms will be obtained.

There is, from our viewpoint, a serious downside to the no-contingency contract.  What if the house doesn't appraise for the contract price?  In our title agency we have had more than our fair share of transactions canceled because the home is appraised for less than the contract price.  In that situation, the buyer receives back the deposit, and is out only a few hundred dollars for home inspections and similar costs. 

Obviously, in a transaction without a contingency, the confident buyer now has a problem.  A normal loan to value ratio of 80-90 % is not  going to work.  So the buyer has to be able to put down more cash towards the purchase of the home.

Read the full article here.

For your next title order or
if you have questions about what you see here, contact
Stephen M. Flatow, Esq.
Vested Land Services LLC
165 Passaic Avenue, Suite 101
Fairfield, NJ 07004
Tel 973-808-6130 - Fax 973-227-0645
E-mail sflatow AT vested.com
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