When the Financing Contigency Doesn't Help

http://www.washingtonpost.com/wp-dyn/content/article/2007/08/15/AR2007081502436.html?hpid=topnews

This Post article points out something I have been telling REaltors for weeks. Many deals with fully approved loans have fallen through lately becuase lenders's have pulled the plug at the last minute.

What can you do at Contract time to protect your Seller's and Buyers?

First, for listing agents, consider adding language that says that the Purchaser agrees to make preliminary application with the lender of your choice, so that you have a solid back up plan in the event the Purchaser's lender goes belly up, or cancels the loan program in the Specified Financing. This may also give you a better insight into the Purchaser's qualifications to begin with. If the only way they can buy the house is through the use of some exotic loan product that may not be available at closing time, your Seller may want to have a way out of the deal.

For Buyers, keep in mind that your Financing contigency only protects you if you get a written rejection letter from the lender stating that you don't qualify for the financing specified in Paragraph's 2 and 3 of the Sales Contract. If your lender goes under you may still qualify for the loan, but if the lender you chose has no money you can't close.


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