JOEL MAXSON DIRECTOR OF MEMBER LEGAL SERVICES Financing Contingencies Why is this Important? NAR survey: 1 in 3 closings delayed or cancelled, with financing issues as the top reason Widespread misunderstanding about financing contingencies Potentially costly mistakes Reminder: Read the Contract Early and Often Buyer and seller should always orient themselves on the contract they signed both before and after issues arise. It provides a detailed map of how to handle issues like failure of a financing contingency. FAR/BAR Financing Contingency (when Buyer does not receive Loan Commitment) Phase 1: Effective Date Loan Commitment Deadline Buyer applies Both parties wait Neither side may unilaterally cancel FAR/BAR Financing Contingency (when Buyer does not receive Loan Commitment) Phase 2: Loan Commitment Deadline 7 Days Prior to Closing Buyer or Seller may unilaterally cancel by giving written notice to the other side If either cancels, Buyer preserves the right to get the Deposit back FAR/BAR Financing Contingency (when Buyer does not receive Loan Commitment) Phase 3: Fewer than 7 Days Prior to Closing If neither party has terminated, financing contingency is deemed waived Essentially converts the Contract to a cash deal FAR/BAR Financing Contingency (when Buyer DOES receive Loan Commitment) Buyer must notify Seller in writing upon receipt of Loan Commitment If the Contract does not thereafter close, Seller should get the Deposit unless: Lenders appraisal is insufficient Lender cites Property related conditions for denial (Lender suffers financial failure) (Seller default) Other Contracts Every contract is different, so recommend that the parties carefully review the entire contract REO Contract Local Board Contract CRSP-14 Developer Contract Limit Your Personal Liability Encourage parties to read their contracts Avoid definitive statements like your deposit is safe, or you dont need to do anything right now Clarify your role vs. an attorneys role