Usually included in a sales contract, a mortgage contingency gives
buyers the option of backing out if they can’t obtain financing within a
specified period. And if they do back out, they can take their earnest money deposit with them.
But the combination of a competitive market and a difficult lending
climate has made sellers in Northern Virginia less amenable to such conditions.
They want non-contingent or all-cash offers. When you have a market that’s heating up, sellers feel emboldened to say to buyers, ‘I’m not
going to give you this clause because I don’t want to take the risk that
you can’t get your mortgage.
For buyers, however, signing a contract without a mortgage contingency
is risky. If their financing was delayed or denied, they could forfeit
their Earnest money deposit amount.
In such a competitive market, buyers who need financing may find
themselves up against those able to pay in cash or put at least 50
percent down. Some of the buyers have decided to pull
out of the market altogether until inventory loosens up. Is going ahead without a contingency ever a good idea? Only if the buyer can afford it!