<p>No, I am not selling my home. I do have a question bc I have a relative who is selling a home. How does it work if a realtor brings in a buyer, and an offer is made subject to financing? If the prospective purchaser does not get financing, can the seller get a dime? Taking the home off the market for 2 months in the spring (prime selling season in a lousy market) could be a hardship. Anything that a seller can do to be compensated if the deal does not go through?</p>
<p>I believe the house continues to be shown as ‘contract pending’ until the financing is in place for the prospective buyer. I would be sure to have a deadline for the prospective buyer to produce the financing.</p>
<p>Your relative needs to talk to their broker about this but many deals are falling apart because of the inability of the buyer to get financing. A smart buyer in this market will have a pre-qualification letter from their lender. In CA the house will not go into escrow and will still be on the market if an offer (buyer) is not yet qualified and so the house will NOT go off the market during this time. Again, please check with a broker in your relative’s area.</p>
<p>imho a seller needs a real estate lawyer looking after the seller’s interests and to help with this sort of scenario.</p>
<p>It can vary with local laws but otherwise it depends on how the contract is written. As a seller I would never sign a contract that would essentially take my house off the market for that long unless it was secured by a decent deposit that they’d forfeit if they bail from the contract. It’d be better to limit the timeframe when they can qualify for the loan. This is especially important now that loan approvals might be tougher than in the past making it more likely the prospective buyer will fail to secure a loan.</p>
<p>It’s pretty straight-forward in the contract for the sale and is easy to understand. The seller just needs to either write up the contract themselves or otherwise read and understand all the terms in the contract.</p>
<p>I agree with ucsd<em>ucla</em>dad. I would require a hefty deposit that they’d forfeit if there was any bad faith on their part. Don’t know what kind of checks you can require–credit check, for example–before signing. It should be written so that anything that’s their fault --ie. poor credit rating, previous bankruptcy, etc.–that causes them to be denied financing would forfeit the deposit. If you can, I’d require proof on income, too. There also should be a definite time limit. I wouldn’t go beyond 30 days. </p>
<p>Not sure how such contingencies work in your state. We purchased a house once with a contingency. Before we removed the contingency, another buyer came along and offered more money than we had. Because of the contingency, we had the option of matching that offer or nullifying the sale (and receiving our deposit back). The seller was a real estate broker/shyster who wanted to get us and the other buyer into a bidding war. We didn’t really like the house but needed a place to live and, on top of it, were literally en route to the airport for a month-long trip to Europe. We didn’t have time to consult anyone other than our own real estate agent (who being in another state was not sure of the legalities in the new state). I’ll never forget my husband’s comment to the seller’s agent: “Tell him, I have only 2 words to say, and one is a verb and one is a pronoun!” I thought it was hilarious, but I’m not sure if the agent understood.</p>
<p>Turned out we found a much nicer house from an honest seller/builder when we returned–return on Monday, viewed and signed contract on Wednesday, got keys on Friday, moved in on Monday!</p>
<p>Most of the time it’s a contingency, the seller gives the buyer X days to get financing and lets them off the hook if they are not able to get it.</p>
<p>Needless to say, at this time when so many are not qualifying, it’s not a good deal to make unless the seller is desperate. Which many sellers are…so, it’s up to the seller to get as much info as possible about the buyer before going out on this limb. </p>
<p>Ask for a credit report for starters. Ask for info on their places of employment and salaries. They should be willing to give the seller these things if they are serious buyers.</p>
<p>Credit scores, W2s, brokerage statements, basically anything that a buyer would need to provide to a lender is what a seller can demand to be given in order to accept a purchase offer contingent on financing. Where I live in California, many sellers will not accept a contingent offer without these documents as a minimum, and in addition sellers are asking for a statement by the underwriter that the buyer is qualified for the loan. That’s not a pre-qualification letter from a lender, that’s a qualification from the underwriter. There are far too many sales falling apart over buyers’ inability to get loans for any seller to risk having his house tied up and off the market without very strong assurance that the loan will happen.</p>
<p>Of course, full cash offers don’t need this kind of contingency :)</p>
<p>Technically, a house can stay on the market with a financing contingency. The contingency should be written that the Seller can force the Buyer to remove the contingency or terminate the contract if a non-contingent Buyer is found. However, Realtors are reluctant to show houses that have contract pending with financing contingencies.</p>
<p>Best not to take a financing contingency offer unless the buyer is pre-approved (not pre-qualified) by a lender for an amount equal to or greater than what is needed to purchase your house.</p>
<p>
</p>
<p>Yes, this is the bottom line and their concern.</p>
<p>I think your relative can require offers come with a qualification letter from a lender. I think it normally takes two weeks for an average mortgage to be approved, so at the most two weeks off market should be enough ?</p>
<p>hmmm, I have been told that lenders are not go going to give a qualification letter. Anyone know? Also, my DH told me that it takes about 30 days for mortgage approval. I think that the sellers are going to ask that a deposit be forfeited if they bail out/can’t get financing. I suppose they will have a decision to make if the buyers don’t agree to lose their deposit. The problem is that homes are not moving, although there has been some recent activity in their area (finally!).</p>
<p>A good realtor works with their clients and has a good idea of the housing the clients are will be able to afford. I have bought and sold quite a few houses and I have always had a financial contingency. As I remember it, I usually would have lost the deposit fee if financing was not available. The contingency also protects against a major issue such as title concerns and inspection deficiencies.</p>
<p>I am wondering, what is a normal % to forfeit if financing is not approved? Do buyers risk losing 10% of purchase price? Seems like a very stiff penalty, but it is also a great loss to the seller to take it off the market, or not have it shown bc of the contract. </p>
<p>The sellers are nervous also bc they were about to list with a new broker, and then the old broker suddenly presented an offer. No offers were ever presented to the seller while listed with the first broker. The sellers were aware of that the broker did have one couple visit twice, but they had not made an offer until now (weeks had passed since they had seen the property last). The seller believes that the old listing broker called the potential buyer and really worked on them to attempt to put together a deal to save her commission. The sellers are wondering if the potential buyer has the ability to make the purchase.</p>
<p>If someone is a serious buyer in this market, they should have in hand some pre approval for financing, and the contingency should be just to get the best deal possible in terms of interest/payment terms. It should be limited in time (two weeks is realistic). In general, it is not usual that the deposit is forfeited for lack of financing if there was a contingency, and although it can be written that way, in this market I doubt anyone will agree. </p>
<p>The seller’s realtor should help investigate the prospective purchaser in terms of credit worthiness etc. before signing anything. I have seen good realtors, and not so good ones, and the quality of the realtor that you choose if you are the seller is going to be important when things are difficult to sell. </p>
<p>In NJ, realtors write contracts which are then cancelled and re written during attorney review. In NY it was the practice (when I lived there and practiced law there) that the contract was drafted by the lawyers, and it could take some time in haggling to complete. Other deals could come up in NY while this was going on, and there might be a “binder” to hold the house. Sometimes the binder might be retained by the seller if the buyer did not act in good faith etc., but usually this did not happen. Each state has its own law and procedures for this type of thing.</p>
<p>Northeast - I wrote my post before I saw your post. In the NJ Multiple listing contract, I think the broker is protected for any offer from someone who worked with that broker, even after the listing expires, for some limited time. Now is the time to find out what info the broker has or can get</p>
<p>anothermom, Is it the job of the broker to see the preapproval for financing prior to presenting the seller with an offer? </p>
<p>Apparently there is was also just a “bit of change” in the offer. Initially the offer was presented as an “all cash deal”. That offer was not accepted. A counter was made, and then there was a meeting of the minds somewhere in the middle. The difference between the initial offer and the final offer was not a huge difference, but then buyer changed the terms to “seeking financing”. Huge difference! The seller then asked for yet a bit more for the sale of the property (not much more) and that price was apparently agreed to by the buyers.</p>
<p>When I bought a house two years ago, the realtor that I used had me get my preapproval, and show it to the seller when I made the offer. When I sold my former house, my realtor got that info for me. If they did not get the preapproval, seller can ask for this prior to signing. Lots of other hurdles come up too: inspections, low appraisal for sale due to lack of comparables (even with financing contingency). Less $$ for all cash, if it not too much less could be a savings later (if no good comparable for appraisal for mortgage). Back to my initial mantra, a good listing realtor will know about the market and try to make it as easy as possible for the seller.</p>
<p>Thanks everyone. I will relay all of this information. Hopefully, the sellers can call their attorney and ask a few questions.</p>
<p>It depends on your area, Northeastmom. When we moved here to NY, we were outraged and shocked how business was done here. In our old area in the midwest, offers were considered very seriously and earnest money was a big deal. Here it just was not. You need to talk to a real estate attorney about local laws. No sense making a lot of provisions, if they are not being upheld in the area, which was the case here.</p>
<p>In our area it would be common to accept that offer within limitations, but keep the house on the market and take back up offers, so that when the day by which the buyer must perform arrives, there are other offers available to the seller</p>