Many homebuyers today are competing with multiple offers due to the low inventory of homes for sale in their price range. In this environment, many homebuyers consider placing a “non-contingent” purchase offer on the new home because it could potentially help them win a bidding war. A non-contingent purchase offer means that your offer to buy a house is not contingent (or conditioned upon) any of the common contingencies such as your ability to obtain financing, your ability to sell your current home or an independent appraisal of your new home. Here are three of the common risks associated with making a non-contingent offer:
If you waive the contingency of selling your home first, it means that you’re still obligated to purchase the new home even if your old home doesn’t sell. This only works for homebuyers who don’t currently have a mortgage, or homebuyers who can afford (and get approved for) two mortgage payments – one on the old home, and one on the new home.2 – What if Your Financing Approval Falls Through?
Even if your financing approval is a “done deal”, it’s never really done until you get the money. For example, what if you lose your job between the time of the financing approval and the time you purchase your new home?
3 – What if the New House Doesn’t Appraise at or Above the Purchase Price?
In this case, you would likely need to come to closing with the difference in the two values. That’s because mortgage lenders only lend you money based on the LOWER OF the purchase price or appraised value.
Of course, this is not an exhaustive list of everything you should know about waiving contingencies! That’s why it’s important for you to check with a real estate attorney before making this type of decision.
Contact me for more information about your mortgage options.