"Contingent on Financing" time limit?

Question

Hello,

I have an agent telling me  that there is a time limit for financing and if bank does not come through or bails then I lose my   earnest money?   I told her I was going to find an agent who does not believe this.   Anyone heard of such an agreement?

Wayne Brooks · Answer

Gl L. I think your agent is being honest with you, and you are misunderstanding.  I believe they are telling you your financing contingency has a time limit, within which it is either "use it or lose it", Not that you lose your EM if you can't get financing within the time stipulated, And you give proper notice.  Just read the standard contract to understand what he is telling you.

Guy Gimenez · Answer

@GL Lin

In the TREC form, you have the number of days shown to obtain financing or provide written notice that you were unable to obtain such, and therefore terminate the contract. If you don't terminate and you can't get financing, you cannot use that provision to terminate, however, that provision is only one of many buyer termination points in this specific contract form.  If you don't exercise the termination point in the financing contingency, and no other termination points apply in your situation, then you do in fact lose the earnest money if you fail to close.

GL L. · Answer

Thanks for the reply.  I definitely don't want to remove the contingentcy.  I think it was my agent trying to remove .   Any way I am working with somene who has more experiences in these areas. now.

Wayne Brooks · Answer

Let me guess, dealing with that Texas contract again? It's simple.....read the purchase agreement.  Each state has a slightly different version.  Generally, ALL purchase contracts have a time limit on the financing contingency.  You think a seller would want to find out the day before closing, after they've moved out, that you can't get financing and you get your EM back, no harm no foul?  Here, if you put 40 days for financing, then the seller can cancel the contract any time after that, if the contingency is not removed.  The Buyer has up until 7 days prior to the scheduled closing to get their EM back, based on failure to obtain financing.

Account Closed · Answer

The time limit is usually the amount of days to close in your contract 45,60 etc.The banks today many times take much longer then these time limits so extensions are requested when approaching the deadline.If the buyer does not want to extend you would get your deposit back as your contract is written with a financing contingency.I did 3 sales a short time ago and in all 3 cases I had to grant an extension averaging 2 weeks. I had a sale 3 years ago that I had to extend over 6 weeks. Usually when you are that far along in the process most sellers don't want to start over because it would be another 60 days for a sale. The most common delay from the banks happen in the final stages of underwriting .Find a new agent who knows the process

GL L. · Answer

Thanks that is what I know as well  and have done.  Im  am not  sure why she wanted to add wording that would allow the seller to keep earnest money if bank bails.   I wanted it contingent on finacing which not what she wanted  to put in the cntract.

Also my agent want to put in the contract  21-30 days for closing  and if bank did not come through  by then, she was wording  it  so that I would lose my  earnest money.  So much for "contengent on financing"

Guy Gimenez · Answer

@GL Lin

If financing is not obtained within the time frame specified and you fail to provide written notice of termination, the financing contingency is no longer in play.  If the lender backs outs at the last minute, you do lose your earnest money UNLESS you have additional contractual exits. That's why as a buyer you want as many days as possible in the first paragraph of the financing addendum and as a seller I want to keep those days to a minimum.

GL L. · Answer

Yes that the way it should be but according to my agent it is not.  You lose money no matter what if financing falls through.  I agree if seller want to back out after deadline for closing they can but  buyer should not be paying EM if it was contengent on finaincing.

Kyle J. · Answer

It's not a matter of finding an agent who "does not believe this". It comes down to what is actually written in the contact.

Typically there is a date/deadline that you must remove a financing contingency (if there is one) or cancel the contract (unless both parties agree to extend it). For instance, in California, the standard contract language/timeline for a financing contingency is 21 days. However, in reality it could be any number of days that both parties agree/stipulate to in the contract.

If you were to remove the financing contingency and then later try to get out of the contract because your financing fell through, then yes - you could be at risk of losing your earnest money deposit.

"Contingent on Financing" time limit?

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