About a week and a half ago I ranted about buyers here in Arizona cancelling their real estate purchase contracts a day or two before (or even on) the closing date because they couldn’t secure financing. This seemed to happen most often in cases where buyers were using 100% financing and also asking the seller to contribute toward the buyers’ closing costs.
Georgia has solved that problem in its latest purchase contract. According to Doug Quance of Brokers First Realty,
The new agreement has a negotiated Financing Contingency Period, which will offer the buyer a limited period of time to be able to terminate the contract due to the inability to obtain financing without penalty.
For the buyer to preserve and protect their earnest money deposit, the buyer will need to present the seller with a letter of loan denial prior to the end of the Financing Contingency Period.
The interesting twist is the actual length of the Financing Contingency period isn’t in the boilerplate, at least from what I’m reading on Doug’s post. Perhaps he can shed additional light on the subject.
Without such a Financing Contingency period in place here in Arizona, we’re left to our own devises to protect our seller. I’d fiddled with language regarding repairs but, when I was presented with another 100 percent/seller pays closing cost contract this weekend, I ended recommending the old standby – a hard earnest deposit with all buyer financing contingencies waived after the inspection period.
The impact is the same as Georgia’s clause but theirs is worded much friendlier. And you spend less time arguing over boilerplate, even boilerplate with a blank line, than over a clause added to Page 7 of the Arizona real estate purchase contract.
There are more changes to the Georgia contract … if you love legal minutiae or otherwise are suffering from some sort of sleep disorder (no reflection on Doug – just the subject matter), you can see more details on the Georgia Association of Realtors‘ site.
(And a quick thanks to Atlanta 575 Real Estate, where I saw the original post.)