Leveraging Contingency Waivers to Thrive in a Brooklyn’s Seller’s Market
Oct 10, 2023
In the New York real estate world, buyers often find themselves in fierce competition, contending with multiple offers on coveted properties. In a seller’s market, it’s not uncommon for sellers to consider waiving contingencies to sweeten their deals. Let’s explore how buyers can understand and potentially navigate contingency waivers in this high-stakes environment while being mindful of the associated risks.
Getting to Grips with Contingency Waivers
In a typical real estate transaction, buyers introduce contingencies into their offers to protect their interests. These contingencies, encompassing aspects like home inspection, appraisal, and financing, provide an escape hatch for buyers should certain conditions go unmet. However, in a seller’s market where speed and certainty reign supreme, relinquishing some or all of these contingencies can give your offer an edge.
The Home Inspection Contingency
Among the most prevalent contingencies is the home inspection. Buyers usually have two inspection options: a general inspection or a comprehensive one that permits them to request repairs or compensation. Nevertheless, sellers often prefer the general inspection, which eliminates negotiations but commits the buyer for a predetermined period.
While sellers may not be enthusiastic about home inspections, entirely forgoing them is seldom advisable. These inspections serve as protective measures for buyers and offer transparency regarding the property’s condition. Being persuaded to skip inspections could potentially lead to future complications, as sellers must disclose any issues discovered during the process to prospective buyers down the line.
The Appraisal Contingency
Another key contingency buyers frequently consider is the appraisal contingency. If the property’s appraisal falls short of the contract price, it can trigger negotiations or even allow the buyer to exit the deal. However, a low appraisal can also present an opportunity for compromise.
If a buyer has extra financial reserves to bridge the gap between the appraised value and the contract price, waiving the appraisal contingency becomes less risky. Sellers can leverage this situation to their advantage, working with the buyer to reach a mutually satisfactory resolution, such as a price reduction or a combination of concessions.
The Financing Contingency
The final hurdle for buyers often involves the financing contingency. This contingency permits buyers to exit the deal if they fail to secure financing approval from their lender. While this contingency can pose risks for sellers, especially when dealing with online lenders or large institutions, it becomes less precarious when partnering with reputable local lenders well-versed in the local market.
Buyers can mitigate the risk associated with waiving the financing contingency by obtaining pre-underwriting from their lender. This rigorous review of their financial situation makes it more feasible to waive the contingency confidently.
In the competitive Brooklyn seller’s market, sellers may encourage buyers to waive contingencies to expedite the transaction. However, it’s crucial for buyers to approach this decision thoughtfully. Contingencies serve as protective mechanisms for buyers, and surrendering them prematurely could result in future complications and disputes.
While sellers may leverage contingency waivers to enhance their offers, it’s imperative for buyers to maintain transparency and engage in open communication throughout the process. By comprehending the potential risks and benefits and seeking professional guidance, buyers can confidently navigate contingency waivers in Brooklyn’s thriving real estate market, ultimately ensuring a smoother and more successful transaction.
Realty Collective, LLC does not provide legal advice. This material has been prepared
for informational purposes only, and is not intended to provide, and should not be relied on for legal advice. You should consult your real estate attorney before engaging in any real estate transaction.