Financing Contigency For Home Buyer's Financing

Added November 18, 2008 by Ilyce R. Glink and Samuel J. Tamkin

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Summary: Most home sale contracts include a financing contingency, in case the buyer's financing falls through. Financing contingency sets a time frame for the buyer to find another lender. What options do the listing agent and the seller have when a buyer does not meet a financing contingency deadline?

Q: I am a listing agent on a property under contract. The buyers mortgage company declined the buyers. The buyers still want to buy the house and want to seek other lending options. The buyers still have seven days on their financing contingency. If another offer comes in, can the seller accept it?

A: The buyers financing contingency is still in effect. The question is, could the sellers accept a back-up offer under other circumstances or with other contingencies in effect? If so, then the sellers can accept a back up offer under these circumstances.

That said, you better make sure that the sellers aren't put into the position of having signed two contracts and having two contract buyers having a claim on the sellers property.

In your situation, if the first buyer ends up finding money to buy the home, the second buyer would have a claim against the sellers for their failure to sell the home to them.

You can have the second buyer sign a contract to buy the home and the seller but make that contract subject to the cancellation of the first contract. In this scenario, if the first buyer is unable to buy the property and cancels the contract, the second contract could then move forward.

One note of caution: In some contracts, the sellers are restricted in marketing the property or even accepting other offers for the purchase to the property while there is another valid contract. Again, you don't want the sellers to be in a position of being sued for entering into a second contract in violation of the terms of the first contract.

Please talk to a real estate attorney who can review both contracts to make sure your seller is protected.

Nov. 18, 2009.

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