rickjones posted on August 02, 2011 11:00
So you have found the perfect beach house! Now comes time to start the negotiation process. You agent has advised you on what he or she feels is the real market value of the property and you want to purchase it for the absolutely best price. You know it is a buyers’ market, and that the average discount from list price is about 8% on LBI.
You have done your homework and are preapproved from your bank. Time to rock and roll!
BUT, just a note of caution. Buyers are keenly aware that banks are very slow and sometimes hesitant to lend, and in the course of providing a price concession may ask for waiving your mortgage contingency in the contract. You are pre-approved, so not a problem, right? WRONG!!
Preapproval letters, and even initial approval letters have contingencies. One of them is the appraisal of the house. Another is financial documentation that can be fairly rigorous to provide. A clean title report is often a third.
Appraisals often carry the most danger. I am amazed at how many banks use appraisers that do not even have access to the local MLS, and rely on a listing agent to provide comps for them. Even with the recent tightening up of standards, this seems to continue.
If you waive a mortgage contingency, yet still plan to finance your purchase, remember that you will suffer financially if you fail to obtain the mortgage. Your dream home will go back on the market, and the damages suffered by the seller can be costly.