Home Selling in Austin>Question Details

Concerned, Home Seller in Austin, TX

If buyer does not have the ability to provide finance in the 3rd party financing addendum on agreed date, can I as the seller cancel the contract?

Asked by Concerned, Austin, TX Wed May 11, 2011

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inna ivchenko’s answer
If someone is not able to secure the financing committment from the Lender, obviously they are not able to buy that property. If they don't want to cancel hoping to find another lender, they can. But if the seller is determined to cancel and not to wait, the listing agent must prepare the form: Notice to Perform and there is still no answer, the seller has to notify the escrow and sign " Cancellation of contract, release of deposit and joint escrow instructions'' where the canceling party shall specify details about releasing of EMD( deposit money) if any.
Yet, if you can avoid the cancellation, try, if possible, to work it out. Sometimes another lender steps in and saves the day for everyone. Good luck!
0 votes Thank Flag Link Wed Jun 19, 2013
I know this sounds simplistic, but if that is what your contract says, then yes. Otherwise, then no. Do you have a copy of your contract with the addendum?
0 votes Thank Flag Link Wed May 18, 2011
The quick answer is that you still have a binding contact in the event your Buyer does not opt out of the contract within the specified time of the 3rd Party Financing Addendum (within 15,20,25 days -whichever you selected). All the Buyer loses at this point is the ability to recieve their earnest money back due to not being able to secure financing. You still can not terminate at this point.

It might just be that the Buyer is still willing/working to move forward but can't secure their financing committment from the Lender until after the 3rd Party Addendum Date has passed. In this case, the earnest money is still 'hard' and Buyer still intends to close. I don't believe you'd want to cancel if this was the scenario.

If you 'know' that the Buyer is not going to close then you can use various tactics to terminate the contract early by maybe giving a partial release of earnest money and keeping the rest. Otherwise, your stuck with your current Buyer until your agreed to settlement date.

Scott Butcher
Mortgage Banker
Maker Capital Group, LLC
0 votes Thank Flag Link Thu May 12, 2011
You should really be having this discussion with your Realtor because the answer is simple and straight forward and can be found in your purchase contract. Have you had a discussion with your agent about this yet?

Essentially the borrower will have a given amount of days to obtain financing. This date is listed at the top of your contract and is a number of days starting with the date of execution of your purchase contract. Once that date has passed if they buyer cannot obtain financing you will in most cases be able to keep the earnest monies and cancel the purchase contract. If the buyer tells you of this problem before the date on the Third Party Financing Addendum than they can in most cases cancel the purchase contract and get their earnest money back.

If you are past this date and there is no hope of the buyer being able to obtain financing then the best thing to do would be to cancel the purchase contract and re-list the home. What you should do next is get the facts from your Agent and the buyer's agent to find out if this deal can happen or not.

Best of luck to you.

Don Groff
REALTOR | Mortgage Broker | Consultant
Keller Williams Realty | 360 Lending Group
o.512.669.5599 m.512.633.4157
0 votes Thank Flag Link Thu May 12, 2011
I'm a bit confused with your questions too. I think a couple of the previous answers said it best: "if the the buyer can't get financing then there can't be a sale." I would speak with your agent and the buyer's agent about terminating the contract if the buyer won't be able to purchase the property. Good luck.
0 votes Thank Flag Link Thu May 12, 2011

I am confused by your question and the answers given. Do you know for a fact that the buyer can't get financing or are you just have a moment of panic thinking "what if"? It seems like the answers given are assuming that the buyer can't get financing for sure and you are wondering what to do. However, I didn't read that in any of your comments (maybe I missed it), so I am confused. If you are just having a moment of last minute panic, you are not alone. :) I haven't met a seller yet that didn't have a moment (or several moments) wondering and worrying about things like this. So hang in there! If you have Realtors involved, talk with them and express your concerns. We've been through it many times and we can explain the process. Sometimes just having the information about how it all works, what to expect, etc. is enough to help with the fears. I hope it all works out for you!! Good luck!!

0 votes Thank Flag Link Thu May 12, 2011
Concerned, where is your Realtor in all of this? I'd lean heavily on her/him to get you through this process, that's why you hired the person.

Separately, I suggest getting in touch with buyer/buyer's agent and presenting the option Brian mentioned in his 3rd paragraph. If the buyer can't get financing, no need to hold up the sales process by preventing you from getting it back on the market. Now, if they can close it's worth waiting an extra couple of weeks.

Good luck!
0 votes Thank Flag Link Thu May 12, 2011
You need to check what the purchase agreement states iof the buyer fails to produce the ability to get financing, most either say the contingincy is waived iof not met by xx date and some give the seller the right to cancel based on the inability to get financing by xx date.
Web Reference: http://www.ScottSellsNH.com
0 votes Thank Flag Link Thu May 12, 2011
If there is no financing, obviously there cannot be a sale. That's why there is a Third Party Financing Addendum and that's why there is a specific date on it. The buyer is the one who should terminate the contract, I cannot understand why the buyer hasn't done it by now. When the buyer notified you that he cannot get financing, didn't he terminate the contract at the same time? Didn't your agent notice that?
0 votes Thank Flag Link Thu May 12, 2011
Teresa provided a great answer. 3rd party financing adendum is not an out for the seller, it is an out for the buyer. They have the option to cancel the contract up until that date and get their earnest money back without question.

If they go past that date, they cannot use that as an excuse to get their earnest money back. If the deal falls through because of lack of financing, then they forfeit their earnest money (to you as the seller). Where you have the leverage is if they request an extension of the contract in order to obtain financing. You can either allow them to extend and hopefully sell your home to them, or you can deny their amendment and they will have to either close on that day (unlikely) or they will have to cancel the contract or be in default, which in either case you get the earnest money.

If you really don't think they will be able to get financing and want to get your home back on the market, as an alternative if the 3rd party financing date has passed, you can give them the option of pulling out now and get their earnest money back.

Hope this helps. You should also be able to ask your listing agent these questions.

It's more than real estate. It's RAYL-Estate!

Brian Rayl, REALTOR®, e-PRO, SFR
Keller Williams Elite - Dallas
0 votes Thank Flag Link Thu May 12, 2011
In most cases, if the buyers fail to give notice of inability to obtain financing and do not cancel the contract for that cause prior to the date stated in the 3rd party finance addendum, the sellers can seek the earnest money held in escrow if the sale does not "close" on the agreed upon closing date (provided there are no defaults by the seller and/or other terms in the contract that allow the buyers an out). However, the buyers still have until the closing date to work on obtaining financing for the purchase of the home.

Hope that helps.
0 votes Thank Flag Link Wed May 11, 2011
no back ups involved, so more of a concern as could jeopardize an onward move and the last minute panic and unknown! Is that not a breach of contract though, i.e. the buyer having to provide and secured financing by the agreed date? I understand that it covers the earnest money, which I'm not bothered about in truth, however I am reading it that it falls as a specific perfomance requirement which has not been met by the buyer - hence questioning breach of contract and gives the seller the option to void the contract?
0 votes Thank Flag Link Wed May 11, 2011
No, that is in place to give the buyer an "out" in the contract. Are you worried that the deal will not go through or do you have a better offer in "back up" that you would rather take?
0 votes Thank Flag Link Wed May 11, 2011
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