How to Protect a Buyer When the Mortgage Contingency and Inspection Contingency Clauses are Waived
Tuesday, March 8, 2022
by Laura Cross
Low inventory, multiples bids, waived contingencies, properties going for well over ask. This seems to be the new normal in our current market.
A Buyer is naturally thrilled when a Seller accepts their offer in this competitive marketplace. Once the initial rush starts to subside, a Buyer can become nervous that they have waived their protections and assume the risk of losing their deposit if they back out of the transaction.
Here are some strategies to protect a Buyer when they have waived contingencies.
- Ask for a home inspection for informational purposes only once the Purchase and Sale Agreement is signed- this will allow the Buyer to know what they are walking into and can help them gather data and provide a plan of action for any important items that need to be addressed Post-closing;
- Request access for lender’s appraisal and request Seller’s cooperation for all lender requests. If buying a condo, request that the Seller complete the Condo Questionnaire; and
- Have a preapproval from a mortgage company in the range of the purchase price, but have a talk with your Loan officer to make sure you have a very clear picture of your finances, the loan and credit score.
- Check for open permits online, or in person at City/ Town Hall.
- Confirm with the City/Town Fire department that there are no underground oil tanks/hazardous waste spills.
- Ask the insurance company to check if any claims have been filed.
- Review/ confirm there are no issues with the transaction that would cause the Buyer to extend their rate lock (e.g., an estate sale).
A Buyer’s Attorney’s Rider at P&S can also add in protections, including asking Seller to represent that:
- There are no hazardous materials or underground fuel tanks.
- They are not in Bankruptcy or foreclosure (as this could delay the closing date), or that there are no major title issues that would delay the closing.
- There was no notice of any legal issues, including any building, environmental, zoning or health issues.
- Request home inspection for informational purposes once P&S is signed.
- Add language that although the Buyer is waiving financing, the Seller agrees to provide access to the lender’s appraiser, and fully cooperate.
- If it is a condominium Unit, add language that Seller will agree to complete a CQ. If over a 5 unit building, add language that the closing is subject to CQ approval.
Please note that the above language does not constitute legal advise. For legal advise, it is recommended that you speak with a MA real estate lawyer.