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Originally Posted by trew
Even though you might be preapproved for the amount of mortgage you need to buy a particular house, that doesn't guarantee the bank will give you a mortgage.
The banks will do an appraisal before approving a mortgage. What happens if their assessment of value is much lower than the purchase price, and they decide it is too risky for them?
If you waive that condition and fail to arrange financing and cannot close the deal, you will loose your deposit and can be sued for damages. These damages could be severe if the house fails to resell quickly (racking up interest claims) or resells for a much lower price (causing a claim on the differential between your offer and the final closing price).
Personally, I would sooner forgo the property inspection condition, although I wouldn't recommend this to anyone either. At least you can close the deal on a house with a cracked foundation.
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Thank you... my point exactly. In a normal market, if you were pre-approved you could be pretty confident, but this is not a normal market. I heard an anecdote of someone backing out of a deal after the bank's assessment came in at $100K below the contract price and the bank wouldn't fund the whole purchase... this is a second hand story, mind you, so I can't guarantee the veracity of it, but I certainly wouldn't want to take the chance, myself.