When making an offer on a home in NYC, it’s not always about the price. That’s certainly important, but it’s not everything. Another way to sweeten the deal and get your offer accepted, despite your offer being lower than other buyers, is by making a non-contingent offer. Read on to find out what this is and why you should weight the decision carefully before making one.

Contingent offers

Most real estate purchase contracts will include a clause which makes the sale contingent on specific factors. It can be a mortgage contingency which makes the closing reliant on the seller first getting approved for a mortgage. It can be a home selling contingency in which the deal relies on the buyer’s selling their current home first. Or it can be contingent on specific actions being performed by the sellers. For instance, specific repairs must be completed first before the deal can go ahead.

Whatever the exact details, the contingency is there to protect the buyer’s down payment. If anything happens which causes the deal to fall through the buyer gets their full down payment back.

Making a non-contingent offer

A non-contingent offer is when a buyer agrees to buy without performing any due diligence on the property or making the deal contingent on any outside factors.  This can be very risky because if something goes wrong, you could lose your entire down payment. If the sellers have multiple bidders, they may insist on non-contingency contracts. It’s easy to understand why. It provides certainty that the buyer will buy at the offering price. It’s not an ideal situation for buyers but if you’re fully confident that you can close the deal, making a non-contingent offer can put you above other sellers whose offers have contingencies.

Imagine this example. A seller has just listed their property for $500,000. After a few days, two offers are made. The first is for $500,000 but includes a contingencies clause which makes the deal reliant on the buyer first getting mortgage approval. The second offer is for $490,000 but consists of no contingencies. Which do you think has a better chance of being accepted?

Most people will choose the second offer with no contingencies. If you can make a non-contingency offer and have either a mortgage preapproval letter or all the cash on hand you can significantly increase the chances of your offer being accepted. The sellers have the assurance that there will be no unforeseen roadblocks which can derail the deal after the offer has been accepted.

It can be risky

However enticing this might be as a way to get your offer accepted it, of course, carries a lot of risks. If you sign a non-contingent contract and something goes wrong, you stand to lose most if not all of your down payment. Before making such an offer, you should discuss it with your attorney and have them review the offering plan, the buildings insurance and the last two years of your financial history. If they inform you that the building is in bad shape or that you could have problems getting approved for a mortgage DO NOT sign the contract.

If the deal falls through it’s not good for the sellers either. On signing the contract, they will have taken the property off the market (probably losing the opportunity of signing with someone else) and wasted precious time. The buyer and their attorney will face a very tough uphill battle to get any of the down payment back. Non-contingency offers are great for getting above other buyers but only when you are confident that there will be no roadblocks that could derail the deal.

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