Recent Changes to Financing Contingency: What You Need to Know!

The financing contingency has a long history of confusing realtors, buyers and sellers alike. For some reason, it’s just a hard concept to grasp and sadly, can cause deals to fall through. Recently, in an effort to relieve some confusion, there have been some adjustments. Find out what you need to know for a smooth transaction!

Recent Changes to Financing Contingency


What Changes Have Been Made to The Financing Contingency

  • The default date has been moved to 30 days instead of 45 days. So, if you leave this blank on the sales agreement, it will default to 30 days.
  • When you are putting in an offer, be sure to talk to your lender to confirm that they can deliver on loan approval in 30 days. (Sidenote- this also makes your offer stronger.) 
  • Loan Commitment from a bank has now changed to Loan Approval. Buyers will no longer be allowed to have a “commitment” from a bank, they need to be fully approved for a loan. 
  • Diligent effort- your buyer has to agree to work with the lender in a timely fashion and provide needed information, documents, etc.
  • The seven day before closing loan commitment is now null and void

Biggest Change to Financing Contingency

Once your lender comes back to you with a decision about your buyer, you have to explicitly notify the seller and seller’s agent of the decision in writing. If you do not notify the seller and/or agent in writing once the contingency period is over (remember: default is now 30 days) then the  seller can terminate contract during a three day window.

For example, your lender alerts you that your buyer is approved and for whatever reason, you forget to notify the agent within the contingency period. That seller can decide to cancel the agreement. Perhaps he has a back-up cash offer higher than your contract or changed his mind on selling, whatever the reason, he can terminate it if you’re not on the ball. You’re going to have a very unhappy client on your hands, not to mention a potential lawsuit.

Set a reminder for yourself to alert the seller and agent immediately when the approval comes in.


Can You Still Get an Extension?

Yes, if your seller is willing. If your buyer is not approved at 30 days, be sure to work with your lender and seller a few days before to get an extension. Always be very transparent with your buyer and work to protect them and their deposit. Forgetting to ask for an extension could potentially implode the deal.


Mortgage Company or Big Bank?

If possible, it’s always easier and faster to work with a mortgage company. The big banks, tend to take a lot longer and deals fall through more often. Talk with your buyer about your experiences and work together to find a lender that always delivers on time!.

At Dalton Wade we believe that today’s buyers and sellers need a trusted resource that can guide them through the complex world of real estate. With our extensive knowledge and commitment to providing only the best and most timely information to our clients and agents, we are your go-to source for real estate industry insight and advice. Contact us today to learn more!