Financing contingency - 3rd party financing
addendum
In Texas the Buyer can place Credit
Approval Contingency in his/her offer and when is agreed
by the Seller, it becomes part of the contract. Then,
this credit approval contingency allows the Buyer to
terminate the contract without any consequences and get
his/her Earnest Money back, within certain days if
he/she cannot obtain financing based on several terms
and conditions.
Let’s go through this Financing
Contingency
- 3rd party financing Addendum TREC NO. 40-5
together:
The number of days that Buyer has
time to notify the Seller is negotiable and must be
filled out and agreed by both Buyer and Seller. Let’s
use 14-21 days as a
TYPICAL value in our area
for illustration purposes only. Please note that this
value could be completely different for different
contracts
Now let’s look at the Terms and Conditions of the Loan:
For simplicity purposes, let’s use
Conventional Financing options here. All other Financing
options such as Texas Veterans Loan, FHA Insured
Financing, VA Guaranteed Financing have similar, but not
exactly the same, options.
As you see there are five blanks
that define terms and condition of the loan. These five
terms and conditions are negotiable and must be filled
out and agreed by both Buyer and Seller. Let’s use some
TYPICAL values in our
area for illustration purposes only. Please note that
these values could be completely different for different
contracts.
If the Buyer cannot be approved
with these Five (5) specific terms and conditions,
he/she can, but doesn’t have to, terminate the contract
within the specified number of days shown in first
figure (e.g., 14-21 days) and gets his/her Earnest Money
back.
In my Opinion, This is not fair to
the Seller that loses e.g., 14-21 days without getting
anything. The Buyer must have done his/her homework,
applying for a loan and gotten pre-approved before
making any offer. After accepting the offer by Seller
(which becomes contract), he/she should not be given
addition 14-21 days to apply for the loan.
I am not sure other states have the
same or similar options, but I would like to hear your
side of story.
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