The Financing ContingencyJuly 13, 2013
As if the Boston real estate market wasn’t crazy enough due to the shortage of inventory, now there has been a lot of talk about mortgage rates rising in the near future. As history often repeats itself, the era of the “Gold Rush” is seen all over again.
Cash Is Golden in Boston Real Estate
From low price ranges to multi-million dollar Boston home sales, 95% of buyers get a mortgage. However, in the higher price ranges of many luxury properties, buyers can eliminate the financing clause to make their offer stronger, knowing that they have the financial ability to secure a mortgage. It is rare to see a cash offer in the Boston home lower price ranges.
Offers used to be contingent on obtaining financing; however, that was then and now we are in a totally different market. Even in the lower price ranges, buyers have the ability and the assurance, of being able to obtain financing before making any offers. Boston real estate buyers are often competing with multiple offers, and almost all these have no financing contingency.
In this frenzied environment, many buyers jump the gun and make a cash offer without having done their homework or talking to a financial institution. In some cases, they end up losing their deposit after they find out that they can’t secure a mortgage and / or can’t qualify for one. In some instances, sellers require not only a pre-qualifying letter from a lender, but they also require a bank statement to show that the buyer has the funds to purchase the property, even if the buyer doesn’t obtain a loan.
The inventory is limited and there are more buyers than properties, but do not buy in a panic - too many things could go wrong. If you approach the market methodically, with the help of a professional real estate agent, you will find your dream home in due time.