What happens if financing is not approved by deadline? (documents, clause, fees)
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My contract says that I have to have my financing approved by this Monday. I got a call from my realtor today saying that while my application looks "very very good" and there is "no reason you won't get it" the financing is taking a long time because of the volume of applications right now. Apparently the market is very strong in Dallas!
The third party financing addendum says:
"Buyer shall apply promptly for all financing described below and make every reasonable effort to obtain approval for the financing (Financing Approval). Buyer shall furnish all information and documents required by lender for Financing Approval. Financing Approval will be deemed to have been obtained when (1) the terms of the loan(s) described below are available and (2) lender determines that Buyer has satisfied all of lender's financial requirements (those items relating to Buyer's assets, income, and credit history). If Buyer cannot obtain Financing Approval, Buyer may give written notice to Seller within 25 days after the effective date of this contract and this contract will terminate and the earnest money will be refunded to Buyer. If Buyer does not give such notice within the time required, this contract will no longer be subject to Financing Approval. Time is of the essence for this paragraph and strict compliance with the time for performance is required."
My realtor said that basically if I do not get the approval on Monday...it should come between Monday and Wednesday of next week...that "nothing bad will happen."
I cannot help but think that something bad could happen because the above legalese sounds scary. Can somebody put my mind at rest? I am in Texas and the above is supposed to be some standard boilerplate TREC form. Thanks.
Going through the same thing. Chances are your seller will have you sign an extension, which means you don't have to pay per diem fees for going past the date.
We started the loan process in April - our closing was just pushed (for the third time) to next Friday. It took the underwriters 50 days to get it through their system, then the seller (its a foreclosure) has to look at it for at least three days (where we are), then HUD has to have it for a few days (we're doing FHA), and THEN we should be clear to close.
The funny thing is, I bet these banks were just as busy back during the bubble, when it came to selling and refinancing... it's just taking a lot longer now because they have to ACTUALLY DO THE JOB THEY ARE GETTING PAID FOR. Takes too long, at any rate.
To the best of my knowledge, it does not void the contract, but it could give the seller an option to void it due to violation of terms. In most situations it is wise to ask for an extension so someone else does not slip in with a back-up offer and push your contract aside. In some situations it just annoys the seller to have to bother with more paperwork, but without a signed extension it sounds like you could be treading on thin ice.
Weird, my realtor said absolutely nothing about an extension and she said only I can void the contract, the sellers cannot do anything. Maybe this is a Texas thing.
If there are contractual provisions that have to be met by a specific date (assuming there is not an "on or about" clause), they cannot be ignored because it could be interpreted as a breach of contract. To protect yourself you should have your attorney ask for an extension in writing.
Last edited by NORMGLO; 06-20-2009 at 06:05 AM..
Reason: typo
The way I am reading it is if I do not get the approval within 25 days, I can back out and get my earnest money back but if I do not, the seller has no recourse, ie the contract is no longer subject to finance approval.
The way I am reading it is if I do not get the approval within 25 days, I can back out and get my earnest money back but if I do not, the seller has no recourse, ie the contract is no longer subject to finance approval.
Who drafted the contract? If your interpretation is correct I hope the seller was made aware of the ramifications. If your interpretation is not correct you may have to buy the house even without financing. I assume an attorney is involved.
The way I am reading it is if I do not get the approval within 25 days, I can back out and get my earnest money back but if I do not, the seller has no recourse, ie the contract is no longer subject to finance approval.
Not subject to financing approval means that the financing no longer matters, and that you are obligated to find a way to pay for the house. The seller can force that issue and you will be in breach of contract if you cannot. The way to avoid this, according to the addendum you posted, is to write a letter telling the seller that, shile you have made tha application as required, the financing has not yet come through, and that you plan to purchase, but are still dependent on that financing.
Not subject to financing approval means that the financing no longer matters, and that you are obligated to find a way to pay for the house. The seller can force that issue and you will be in breach of contract if you cannot. The way to avoid this, according to the addendum you posted, is to write a letter telling the seller that, shile you have made tha application as required, the financing has not yet come through, and that you plan to purchase, but are still dependent on that financing.
Well, the problem is that I do not want to give the seller any kind of "out" here. It seems they are eager to drop the contract and that makes me think they have a backup offer for more than what I offered them.
As far as the financing goes, my broker tells me if I don't get approved, nobody will. She says that is how good my application looks.
Hi, I would have your broker prepare an extension.
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