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You’re a Seller. The Buyer waives the Mortgage Contingency. What does this really mean for the Seller? First, the “Big Picture,” the fewer the contingencies, the better, if you are the Seller. The two main contingencies a Seller is likely to see are the Inspection Contingency and the Mortgage Contingency.
The Mortgage Contingency protects the Buyer’s Deposit if they are unable to obtain financing by a certain date. When the Buyer submits an Offer it is accompanied by a Pre-Approval. The Pre-Approval stipulates how much the Buyer is approved for, along with any conditions (usually items such as continued employment, no material changes to debt-to-income ratio, etc.). Once the Offer is accepted, the Buyer then applies for financing on the specific property. That approval can take a few weeks. If approval is not obtained by a certain date, the Buyer can get their deposit back. If the Buyer waives the Mortgage Contingency, the Buyer forfeits their deposit if they can’t obtain financing or can’t find an alternative way to fund the purchase of the home.
What three things do Sellers need to be mindful of when a Buyer waives the Mortgage Contingency, especially if they received multiple offers on their home:
It is not the Same as a Cash Offer.
Waiving the Mortgage Contingency is not the same thing as a Cash Offer. The buyer still needs a loan to purchase the property.
The Quality of the Pre-Approval and the Lender are Still Important.
We always ask the Lender ten or so standard questions whenever we receive a Pre-Approval. If the Buyer waives the Mortgage Contingency, we still want to see the Pre-Approval. If the Buyer does not include a Pre-Approval with their Offer, we request it. We still want to ask our Lender questions. Always. If the Buyer waives the Mortgage Contingency but has a weak pre-approval or is using a problematic lender, we want our Seller to know that at the time they accept the Offer.
Keeping the Buyers Deposit is not Guaranteed.
Here’s how it plays out. Buyer waives the Mortgage Contingency. Buyer fails to get their Financing. Seller requests the Buyer sign a Release letting the Seller put the Property back on the Market and letting the Seller keep the Deposit. Buyer refuses to sign the Release unless they get their Deposit back. Then the Seller and Buyer usually negotiate how much of the Deposit the Seller gets to keep. The Seller’s goal is usually to get the Property sold, not keep a Deposit which is a fraction of the home’s value and keep the property off the market. We always work to add language to the Offer that the Buyer agrees to forfeit the Deposit and sign a Release if they can’t obtain financing. This helps to head off this situation but doesn’t guarantee the Seller can keep the deposit.
While fewer contingencies are a good thing and having the Buyer waive the Mortgage Contingency does result in one less contingency, Sellers needs to be aware of the above factors when accepting an Offer when the Mortgage Contingency is waived.
Doug McNeilly is a REALTOR® with Coldwell Banker Realty in Wayland, Massachusetts. He specializes in Wayland, Sudbury, Natick, Framingham and the Greater Boston Metro West Area. He can be reached at doug.mcneilly@cbrealty.com or www.dougmcneilly.com
