Hurricane Sandy has left many mortgage lenders concerned over storm-related damage to properties currently on the market or newly under contract. As a result, some lenders have issued a new requirement mandating that all properties be re-inspected prior to closing, Brick Underground reported.
If any damage is found, some lenders are requiring the seller to repair it. Already, some brokers have expressed concern that this will cause buyers to pull out of their contracts with their deposits in hand.
Adam Stone, a real estate attorney with Regosin, Edwards, Stone & Feder, told Brick Underground that there are two main scenarios under which a potential buyer could pull out of a contract with their deposit.
The first is if the potential buyer negotiated a ‘funding contingency’ into their contract. This stipulates that if a lender refuses to finance a loan for any reason not having to do with the buyer, he or she can retrieve the deposit. The other has to do with the ‘risk of loss’ provision included in most standard sale contracts. It allows buyers to cancel their contract if they are unable to gain access to the apartment.
But just because buyers can back out of their contracts, doesn’t mean they necessarily will.
Stone told Brick Underground about one of his clients who is expected to close on a condo at 88 Greenwich Street, which was declared uninhabitable last week. Stone said that his client had no intention of backing out of the deal and was willing to wait up to four months for the repairs.
“He still wants the apartment and is willing to wait until [the cleanup] gets done,” Stone told Brick Underground. [Brick Underground] —Jaywon Choe