The Financing Contingency is NOT a contingency to get financing

The Financing Contingency is not what it says it is. From the date of acceptance of the Offer, until the moment the lender approves disbursement of funds (at the end of the hour of closing when all papers are signed) the buyer and seller are proceeding with a leap of faith.  The buyer does not have a protection of their obligation to close being contingent on obtaining the funds to close from a lender. And, satisfaction of the Financing Contingency is  no assurance that the seller will receive any money on the date of closing.   The Wisconsin Offer to Purchase Financing Contingency, unless modified, is only a contingency for the buyer to be able to obtain a Commitment Letter….nothing is said about the offer being contingent on getting the money.

Financing Unavailable. It happens that the loan approval process uncovers a reason that the otherwise ready and able lender is not willing to issue a mortgage commitment letter for the buyer on the terms of the Offer, or on any terms. According to the contingency stated in the contract, the buyer agreed to send written notice to the seller stating the financing is unavailable and provide a copy of the lender’s rejection letter. The next step is for the seller to take up to 10 days to finance the transaction on the same terms…unless the buyer’s agent filled out the Offer as suggested with a name of loan source.  Because it is common practice to write in “Conventional Loan” even though the offer prompts in capital, bold letters (INSERT LOAN PROGRAM OR SOURCE), buyers are sometimes in an unattractive spot waiting up to ten days for sellers to release them from the contract.

 

 

 

 

 

Author: Tom Meyer Real Estate Broker, Madison, WI

I believe the difference between an accepted or rejected real estate offer to purchase is the drafter's ability to customize the Offer to reflect the Buyer's commitment. Ready, willing, capable, committed, sincere people can out negotiate higher priced offers by moving away from standardized forms. Ask me how.

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