Can the lack of the lender’s underwriting approval of the property still result in the termination of the contract even though the time has already passed for the buyer to give notice to terminate the contract under the Third Party Financing Addendum?

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  • Can the lack of the lender’s underwriting approval of the property still result in the termination of the contract even though the time has already passed for the buyer to give notice to terminate the contract under the Third Party Financing Addendum?

Yes. Under the Third Party Financing Addendum, the buyer has a certain number of days within which to give the seller written notice that the buyer cannot obtain financing approval. Financing approval in this case means that the terms of the loan described in the addendum are available and that the buyer has satisfied all of the lender’s financial requirements relating to the buyer’s assets, income, and credit history. If the buyer does not give the seller such a notice within that time period, the contract will no longer be subject to or contingent upon the buyer’s financing approval for the described loan and the buyer’s assets, income and credit history. No such time limit restricts the lender’s underwriting approval of the property under Paragraph B2 of the addendum. The lender’s underwriting approval of the property can be dependent upon many factors (e.g., appraisal, required repairs, etc.) and must satisfy those requirements even up until the day of closing. This time distinction is important. Under the Third Party Financing Addendum, if the buyer gives the notice within the days stated then the contract terminates and the earnest money will be refunded to the buyer. A failure by the buyer to give the timely notice means that a subsequent failure to obtain the financing approval for the type of loan described and the buyer’s financial requirements would not allow for the automatic termination of the contract and refund of the earnest money to the buyer. Conversely, no matter when the lender determines that the property does not satisfy the lender’s underwriting requirements for the loan, the contract terminates and the earnest money should be refunded to the buyer.

Source: TAR

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