Legal Question in Real Estate Law in New York

House contract contingency

We recently made an offer on a used home which the seller accepted, had inspection done and was satisfactory, parties agreed to move-in date, we also agreed to a 10% down payment and have been approved for the mortgage�seems like everything had been agreed to. Now my atty tells me their lawyer has added a contingency to the contract that states we will forfeit our entire down payment if for any reason the mortgage falls through. He has been doing this for 35 years and says he�s never encountered this before. The sellers atty says its standard. Of course my atty has advised me not to accept this contingency and it appears the deal may fall through. It�s a shame because we really like the house. My question is: is this really a standard practice?? Why would someone agree to this?


Asked on 8/05/08, 2:17 pm

1 Answer from Attorneys
Michael Markowitz Michael A. Markowitz, PC

Re: House contract contingency

Normally a mortgage contingency means that if you are unable to obtain a mortgage (in good faith), then the contract is canceled and you should receive return of your downpayment.

There are some contracts that do not have a mortgage contingency. That means that if you are not able to close within the time period specified in the contract, you forfeit the contract deposit. Some purchasers enter into this type of contract.

It seems what the seller's attorney is doing is providing an illusory mortgage contingency clause. You think it is there, but it is not.

Having practiced real estate law on Long Island for almost 20 years, if the purchaser and seller agree to a mortgage contingency then the contract should reflect the intent of the parties. A real estate transaction is not litigation.

I think the seller's attorney simply has a big ego. In a flat market he or she is simply hurting the client. Don't abandon your lawyer (or the deal). I would attempt to have the broker speak to the seller, explain the problem, and have the seller find another attorney.

Mike.

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Answered on 8/05/08, 2:35 pm


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