Buyer Financing Contingency- The Details!

It seems like buyers (and some real estate agents) have a hard time wrapping their head around the Financing Contingency and it can easily wreak havoc on your deal. Let’s dig into what you really need to know and recent changes made to the Financing Contingency so you (and your buyers) have a smooth transaction!

Buyer Financing Contingency                          
What is the Buyer Financing Contingency?

It means that your buyer doesn’t get approved for their loan and you let the selling agent know within the 30 days of the Financing Contingency period (or before), your buyer will get their deposit back.  


It’s pretty common for the underwriting to take longer than the 30 days in the contingency period, and that’s ok. You have three options to present to your buyer if this situation does happen:


  1. Ask the sellers for an extension- ask for more time for the lender to approve the loan
  2. Cancel the contract- if it doesn’t look like your client will get approved, you may want to discuss canceling the contract.
  3. Go naked- this means you’re not asking for an extension or canceling, your buyers want to proceed and believe that they will get approved. If they do not, they will not get their deposit back.


Protecting Your Buyer’s Deposit

Another situation could also arise that you don’t want to happen. Ever.

Say your buyer gets approved for their loan within the 30 day period, but for some reason or another, you (the agent) forget to inform the seller’s agent that they are approved. There is a 3 day window where they can cancel the contract- no questions asked.


While this isn’t widely common, it does and can happen if you don’t remember the date of the Financing Contingency. So, do yourself a favor and set a reminder in Broker Mint, on your phone or post a sticky note on your computer so that you don’t forget that date!


Changes to the Financing Contingency this Year

Earlier this year there were some changes made to the Financing Contingency that are extremely important:


  • The default date has been moved to 30 days instead of 45 days. This means that 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 the lender to confirm that they can deliver on loan approval in 30 days. If you’re working with a lender that you don’t know, be sure to call them and see how long they typically take to approve someone. For instance, if they take 5 weeks for approval and your Financing Contingency defaults to 30 days, you will definitely need to provide a later date.
  • What was previously called Loan Commitment, has now changed to Loan Approval. Buyers will no longer be allowed to have a “commitment” or “pre-approval”, they need to be fully approved for a loan by the Financing Contingency date.

While this can seem confusing, it really isn’t. Just remember to be aware of the date and if your buyer is not approved by that date, choose one of the three options listed above!


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!