Smart About Money: Protecting yourself without contingencies …

Nick Maffeo These days, buyers are often encouraged – or even pressured – to waive all contingencies if they want to have any chance of buying a house. No mortgage contingency, no inspection contingency, no appraisal contingency. It’s become almost a joke that the “only” way to get a house is to put in a strong cash bid with no contingencies. Which many people can’t do – especially the all-cash part.

Waiving contingencies didn’t used to be common just a few short years ago. It may not be that way in the future. But that is how it is all too often right now.

So how can a homebuyer protect themselves without contingencies?

Most Realtors® want to see that a buyer is pre-approved before showing any homes – a time-saving new development for Realtors®, sellers and buyers. While you might feel you have to waive a mortgage contingency, being pre-approved by a reputable lender does give a buyer some reassurance that you will qualify for financing.

When it comes to waiving an inspection, if you have a good eye for potential problems, that’s a plus. If you don’t, going to home showings with a knowledgeable friend/family member or an experienced home inspector can be a way to lessen the chance that you’re just not seeing something seriously wrong with a house.

At some point in the home-buying process, emotion often kicks in. People find a home they really want or they just get frustrated and tired of looking. In this crazy market, having a trusted, cool-headed sounding-board person on your team can make a big difference. Ideally it should be someone objective and dependable who can recognize both the not-so-great deals and the ones possibly worth stretching for.

While you may decide to waive an appraisal contingency, mortgage lenders are required to do an appraisal that they will be lending to. Ideally, your sounding-board person might be able to help you avoid overbidding in the heat of the moment on even a “perfect” house you just can’t afford to pay way over the appraisal on.

The biggest risk is being forced to walk away from a bid and losing your earnest money, which could be 1% to 5% of the price of a home – $5000 to $25,000 on a $500,000 home, for example.

It can be so hard to see in the moment but many buyers realize later that if they don’t get a specific home, it wasn’t meant to be. But protecting your downpayment is critically important so you can bid on another house in the future.

Some people believe that this incredible (and historically unprecedented) housing market will cool down if interest rates continue to go up.

But the Coronavirus and work-from-home are wild cards that have significantly affected the housing market nationwide, especially in already red-hot markets like Metro Boston.

Making predictions is impossible. Here’s one thing that’s for sure: Waiving contingencies puts your deposit at risk if you have to walk away from a bid on a house.

Protect yourself by speaking to your lender, a real estate lawyer and possibly a CPA to make sure you fully understand and accept the serious and important risks you may be taking.

Nick Maffeo is the President & CEO of Canton Co-operative Bank – right next to the Post Office – in Canton. Have a question? Email to

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