What are standard home-buying contingencies in New York City?
This is one of the most commonly asked questions by new home buyers which will aim to demystify
in the following video.
I'm Chris with Hauseit.
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The most common contingency that you'll find in New York City is the financing contingency.
Now this is a rather blanket term as it encompasses many potential other contract contingencies
such as minimum loan amount contingency.
However this is the most common one you will see precisely because many others that you'll
see in other states are not necessary.
For example a free and clear title contingency.
Now you might see some other states such as California.
However it's not necessary in New York because most contracts will already have standard
language saying that title should be delivered free and clear.
Now another contingency you might think of is the inspection contingency.
However this is not necessary in New York City because most inspections are done prior
to contract signing but after an offer is accepted. What typically happens is a buyer
will ask for a second or third showing after the offer is accepted and then bring a home
inspector with him or her.
Now the home inspector keep in mind will only be able to do a visual inspection.
Don't get confused about the home inspector potentially opening up walls and such and
inspecting pipes.
They will only be able to do what you can do with the visual inspection though perhaps
they may have a bit more experience and perhaps one other thing they can do additionally is
to secretly perhaps test for mold by pricking the walls.
Now this inspection is usually done after the accepted offer because if any issues
are found by the home inspector that you wish to bring up with the seller you can always
do so and perhaps asked to renegotiate for a repairs or a reduction in price.
Now this is actually quite a common tactic by home buyers employed in the city one of
the primary reasons being the seller may already be quite emotionally invested with your offer
they may have had additional days on the market become stop showing as frequently perhaps
and as a result the seller may be more amenable to negotiating.
What typically happens since most sellers are not home contractors or general contractors
themselves is they will usually agree to some reduction in the contract price in lieu of
repairs.
As a result because things are sorted out prior to contract signing an actual contingency
clause in the contract for an inspection is not necessary in New York.
This brings us back to the real contingency that you might see in New York City and that
again is the financing contingency. When it is submitted in an offer format it is rather
vague and a blanket term that undergoes further negotiation by the buyer and the sellers attorney.
Now just to quickly allude to two of the potential variants or additions to a financing contingency.
Let's start with the minimum loan amount contingency.
Now the minimum loan amount contingency allows you to exit the contract even if you get a
commitment letter but for an amount less than specified in the contract.
For example if the minimum loan amount specified and negotiated by your lawyer in the contract
is $2 million but you only were able to get a commitment a letter and a loan for $1.8 million
and made best efforts to do so, well it lets you exit the contract or more potentially
allows you to renegotiate with the seller.
The other variant is the appraisal contingency. As you expected most buyers will assume that
the appraisal will come in at the contract price.
Of course this doesn't always happen in reality and if properly negotiated by your lawyer
well if the appraisal comes in lower than the contract price or whatever the price set
by the appraisal contingency is it allows you to exit the contract or renegotiate as
well. So there you have it hopefully you found this video helpful and now just a recap.
If you are a new home buyer and you submit an offer the most likely contingency that
you'll encounter, if you our financing is the financing contingency.
Other contingencies are quite rare.
There is one other one just to be aware of before we close is the sale contingency but
that you will rarely see primarily because sale contingency is used when a buyer needs
to sell his or her current home and to use the proceeds in order to buy the new home.
This obviously has many moving parts and allows many outs for the buyer if the buyer is not
able to find a another buyer for his or her current home so most sellers are quite hesitant
to accept this sale or Hubbert contingency.
So aside from that what you'll see is usually the financing contingency you won't see very
many other types at all and that really is it.
We hope you found this video helpful and if you did please remember to leave a comment,
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Thank you so much for watching again this is Chris at Hauseit and we hope to hear from
you!