I am confused by your question. If you are referring to the Third Party Financing Condition Addendum, this is an addendum provided by the Buyer to the Seller...not the other way around. This addendum has two purposes.
First, it is used primarily to describe the mortgage program the Buyer is requesting. If this program is not available to the Buyer, the contract can be terminated by the Buyer with Earnest Money returned.
Second, the amount of time the Buyer has to to have their financing approved based on their financial position only is specified in the very first paragraph. If their lender does not approve them...and the only thing that the lender looks at is their finances...the Buyer MUST notify the Seller prior to this date in order to terminate the contract and receive their Earnest Money back. Failure to notify simply means that the Buyer can no longer use not being able to acquire a mortgage as a reason not to close. Unless there are other conditions that would allow the Buyer to terminate the contract, they must close on the property by the Closing Date. If they fail to do so, then the Buyer would probably be in default and the Seller has recourse as describe in the Default paragraph of the contract.
But pragmatically speaking, getting into a situation like this is as a Seller is not advisable. The problem is that while all of this is going on, the house is off the market and may be missing opportunities for other Buyers. Also, if the Earnest Money is in dispute...both sides have to agree to release it to the other party...the listing is still "under contract".
It sounds like the Buyers agent failed to perform by not notifying the Seller/Sellers agent in a timely manner thus putting both parties at risk. But unless the Earnest Money is substantial, my advice is for the Seller to cut losses, release the Buyer and move on.
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