Calculate risks of waiving a financing or appraisal contingency?

The best way to gauge the risk of waiving contingencies is to take a close look at your own finances, as well as research comparable apartment sales in the neighborhood, our experts say.

In a seller’s market where bidding wars are commonplace, many buyers opt to waive contingencies as a strategy for standing out from the competition. Waiving a mortgage contingency—a clause in the contract that allows buyers to get out of a real estate deal if they can’t secure financing—means that the buyer will lose their deposit if their financing falls through.

“Waiving a mortgage contingency in a competitive market is almost essential for a buyer to be competitive,” says Deanna Kory, a broker with Corcoran. “Buyers who are confident in their financial ability to attain a mortgage often do go ahead and drop the mortgage contingency, because their banker has given them enough assurance that it will not be a problem.”

Appraisal contingencies, meanwhile, protect the buyer in the event that the apartment they’re buying is appraised for less than its sales price. Without such a contingency in place, the buyer would have to make up the difference in price themselves if the appraisal falls short, rather than back out of the contract or re-negotiate the sales price.

Pro Tip:

The real estate attorneys at Woods Lonergan have decades of experience successfully representing buyers and sellers in every type of transaction. “We mobilize quickly to guide you through every aspect of your purchase or sale, from home inspection to contract negotiations and closing”, says managing partner James F. Woods. To learn more about Woods Lonergan or schedule a free 15 minute consultation, click here or call 212-684-2500.

About the Author

James F. Woods is Founder and Managing Partner of Woods Lonergan. He has tried more than 60 jury cases to verdict as first-chair trial counsel, beginning his career as a prosecutor, and resolves complex commercial and real estate disputes valued at $1M to $100M+ for business owners, principals, and middle-market enterprises across the New York metro area. He appears regularly in the New York Commercial Division and in the federal district courts for the Southern and Eastern Districts of New York, and has argued appeals in the Appellate Division and the Second Circuit.

His practice covers complex commercial litigation, real estate and asset litigation, partnership and shareholder disputes, fiduciary breach and corporate fraud, and cooperative and condominium governance. He counsels corporate and cooperative boards throughout New York.

The Legal 500 United States ranks James in its New York Elite rankings for Commercial Disputes, and his peers have recognized him with Martindale-Hubbell's AV Preeminent rating. Woods Lonergan is ranked in Chambers USA: Spotlight New York for Litigation: General Commercial and Real Estate. James serves on the Commercial & Business Litigation Committee and the Business Torts & Unfair Competition Committee of the American Bar Association Section of Litigation, and on the Cooperative & Condominium Law Committee of the New York City Bar Association. His commentary on New York commercial and real estate disputes has been quoted in The New York Times, The Washington Post, Bloomberg Law, Law360, and Forbes.

View Full Article