Can I back out of my contract? With the Texas Residential Real Estate Contracts, there are several ways to back out of your contract, terminate it, and retain your earnest money. I've already told you two ways you can back out: The Termination Option Period and the Seller's Disclosure Notice. This next way I'm going to talk about is the Financing contingency.
Until recently, it was always called a Financing Contingency or Third Party Financing Addendum. However, a few months ago, this form was changed. It's now titled "Third Party Financing Addendum for Credit Approval." Even though it's kept the term "financing" in its title, it's now all about the Credit Approval of the buyer. Before, we would need timelines like 30 days or even 45 days, when the loans were taking forever to close, because the buyer needed their actual financing in place in order to remove the contingency. Now, you see times like 10 days or 15 days because all the buyer needs is "credit approval". This contingency no longer pertains to the property itself, and is only about the buyer.
That means, the buyer needs to complete their full loan application, sign all disclosures. turn in all their bank statements, W2's, 1099's, asset information, everything they could need in order to get "credit approval". This has nothing to do with the property like the appraisal, survey, or title. Even though the time frame on this form is negotiable, there is no need for more than 15 days to go in this blank. If a buyer can't turn in their loan documentation within 2 weeks, you're going to have other issues with these buyers further along the way.
Let's put the three posts together in real life terms. You negotiated a 7 day option period and already worked out repairs with the seller, received your disclosure notice prior to executing the contract, and it's now 13 days into the contract and your loan officer is saying there's an issue. Can you terminate the contract and retain your earnest money? YES!
If it was day 15, would you retain your earnest money? Possibly... Within the addendum for Credit Approval, it states that if you give written notice to the sellers, within the time period, that you have not obtained approval yet, the time could be extended, or you could terminate the contract. If the buyers gave notice, they would retain their earnest money on day 15. If the buyers didn't give notice, per the contract, the contract is no longer contingent upon financing, so the sellers will retain the earnest money...
... or will they? There are other ways out of the contract... come back...
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Copyright© 2012 By Donna Harris, All Rights Reserved. You may re-blog with links back to this post.
* Can I Back Out of My Contract? Texas and the Finance Contingency * was first published on donnahomesblog.com.