Neil Garfinkel is quoted in The New York City Real Estate Commentary –“The Sales Contract: What Is a Mortgage Contingency?”
An excerpt appears below:
I recently posed this question to Neil Garfinkel…here’s his response:
‘A mortgage contingency in a contract gives the buyer a time frame within which to obtain the mortgage financing necessary to complete the transaction contemplated by the contract. In the event the buyer does not receive a mortgage commitment within the time frame set forth in the contract, the buyer generally has the right to cancel the contract and receive their contract deposit back. However, if the buyer does not have a mortgage contingency or if the buyer permits the mortgage contingency to expire and thereafter the buyer is unable to obtain a mortgage and is unable to close the transaction, then the buyer may lose their downpayment.
The mortgage contingency is a very important protection for the buyer if the buyer does not have the funds necessary to close the transaction without the mortgage. The mortgage contingency is even more important in today’s mortgage market where the standards for obtaining a mortgage have become very strict and unpredictable. Unlike a number of years ago, when lending standards were relaxed, there is no guarantee that a buyer will receive a mortgage today.
Accordingly, a buyer should request a mortgage contingency unless they have the liquid assets necessary to complete the transaction without a mortgage.’