Thinking back to a time in the early-mid 2000s credit was EASY to obtain, cash was flying around and it was common for homebuyers to skip mortgage contingencies. The crash of 2008 famously led to a flurry of lawsuits during the economic downturn, when buyers found they could no longer finance apartments they’d signed contracts to purchase, and sued developers to get their deposits back.
Since then, mortgage contingences have been very common. Most BUYERS will be hesitant to sign a contract if the SELLER insists that there be no mortgage contingency. Signing a real estate contract is a big commitment. To ensure that you’re protected as the buyer, your agent may suggest you include a number of common contingency clauses in the real estate contract. A mortgage contingency is a provision negotiated into a real estate contract which allows for the purchaser to cancel the contract if the agreed upon financing amount cannot be obtained during an agreed upon period of time. The typical mortgage contingency is between 30 and 45 days. Given the state of the economy and the sometimes unpredictable policy changes by commercial lenders, a mortgage contingency is recommended before agreeing to terms of a real estate deal.
In a nutshell, the reason why obtaining a Mortgage Contingency clause is so important is that if the buyer can’t go through with the purchase because the buyer is not able to get a loan, the seller must RETURN the down payment to the buyer and both parties cancel the deal.
With or without a mortgage contingency it is extremely important to work with an attorney so that you completely understand your options.
Law Office Of Greenblatt Agulnick