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Lets say we get a buyer for our home and while we wait for the closing he changes his mind or financing falls through due to credit or employment issues, what happens? I know we may get his earnest money but that is a small benefit because we now have wasted 30-60 days waiting for the closing to occur with the house not on the market anymore because we thought it was sold.
Have you experienced this and how can you protect yourself from this happening?
You can't really protect yourself from this happening. It happens quite often. You just put your house back Active as quickly as you can and wait for the next buyer. Sellers have specific performance in most states, where you can force the seller to move forward with the sale, whereas you can't "force" a buyer to buy. If they can't get financing, how else are they going to be forced to buy?
There are lots of "what if" when dealing with real estate, and you just need to do your due diligence at the beginning, like having your agent speak with the buyer's lender before you accept an offer. Stuff happens...
It is always best to have a real estate lawyer review all documents during a sale as they will have no financial interest in the outcome and are in the best place to protect your interests.
That is part of selling a house. Unless someone shows up at your house with a bucket of cash there is always going to be some risk involved that it won't close.
If financing falls through, you can't force them to buy your home. Also, be careful of keeping their earnest money.....better read your contract. If it states, "no fault of their own", they could actually sue you to get it back, plus their attorney fees. They can also file a lis pendens and this would affect the future sale of your home. If it were me, I would release their earnest money and relist immediately. I wouldn't tie myself up with a sale that fell through and that includes the earnest money.
To keep escrow from not closing due to financing, the solution is simple. Either only accept all cash offers, or financed offers in which the financing and appraisal contingencies are waived. In a fast seller's market, this is often what a buyer must be prepared to do to have an offer accepted over other offers.
You can't really protect yourself from this happening. It happens quite often. You just put your house back Active as quickly as you can and wait for the next buyer. Sellers have specific performance in most states, where you can force the seller to move forward with the sale, whereas you can't "force" a buyer to buy. If they can't get financing, how else are they going to be forced to buy?
There are lots of "what if" when dealing with real estate, and you just need to do your due diligence at the beginning, like having your agent speak with the buyer's lender before you accept an offer. Stuff happens...
Good advice.
No matter how you try and prevent it, stuff happens with buyers especially in a buyers market. Many feel they are in control and can back out/screw/cheat/whatever the seller.
In a sellers market, the shoe will be on the other foot.
If financing falls through, you can't force them to buy your home. Also, be careful of keeping their earnest money.....better read your contract. If it states, "no fault of their own", they could actually sue you to get it back, plus their attorney fees. They can also file a lis pendens and this would affect the future sale of your home. If it were me, I would release their earnest money and relist immediately. I wouldn't tie myself up with a sale that fell through and that includes the earnest money.
Wouldn't "no fault of their own" be more along the lines of losing their job because their company went bankrupt, rather than not making sure they got pre-approved before going forward with contracting to buy the house? I would think that the earnest money would be forfeit in that case.
Wouldn't "no fault of their own" be more along the lines of losing their job because their company went bankrupt, rather than not making sure they got pre-approved before going forward with contracting to buy the house? I would think that the earnest money would be forfeit in that case.
No, financing can fall through due to other reasons. A buyer can obtain a pre-approval letter and then lose financing before closing because of different factors. This is why the bank will keep track of credit throughout the process and will check it again before closing. Just a few examples: divorce, job change/transfer, loss of job....even bank mistakes happen.
By the way, if the buyer doesn't obtain pre-approval within a set time (it will state the time-frame on the contract), then, yes, this is considered default on the buyer's part.
Yes, we had it happen twice on the same house. One was making plenty of money to make the payments but had a legal judgment against him for a large amount and even making regular payments, his credit would not go through. The other couple was pre-approved, their realtor presented a contract without earnest money and we questioned it. They did not even have $100.00 for an earnest deposit. I called the bank and questioned their pre-approval. That bank doesn't have a good rating for obviously a good reason. But, in the end, the first one was able, with the help of a relative, to purchase the house and set us free! But again, we waited to start moving out or looking for a house so now are in our camper trying to find a house before the snow flies not to mention separated from 2 large storage units of our "stuff". Selling a home is though much worse than buying.
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