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Knowledge Mondays –Financing Contingency in Real Estate Contracts


There is a high probability that when a buyer enters into a property purchase contract, he/she does not have the entire purchase price available. The buyer will have to secure financing for the property before it can close on the property. Securing financing for a property can be a difficult task for individuals that do not have the right credit score or yearly income. Thus, it is crucial that your purchase contract contain a clause with a specific period of time that a buyer will have to obtain financing for a property. This financing contingency clause states that the buyer’s offer is contingent on the buyer securing financing for the property.


A financing contingency clause provides buyers with protection in the event that it cannot obtain financing for the property. It also provides sellers with the assurance that closing will only proceed if financing is available. Usually the contingency period last between 30 to 60 days. If a buyer is not able to obtain financing for the property within the set period of time stated in the contract, the buyer is relieved from the obligation to buy the property. If the buyer does not want to cancel the contract and instead would like an extension to secure financing, a seller may either accept or deny the request. As the seller you have two choices. The seller may either cancel the contract and find another buyer or provide an extension so that the buyer can secure financing.


Additionally, financing contingency clauses may become very specific. For example, a financing contingency clause may state that the purchase of the property is contingent upon the buyer obtaining financing at a rate of at most 6% on a 25-year term. By providing a clause that specifically provides the terms that are acceptable to the buyer, a buyer can be confident in the fact that it will not have to continue with the purchase of a property if the financing obtained is too high.


If you would like to discuss your property purchase contract, schedule a consultation with the experienced attorneys at Alvarez Law Group today. Call us at (786) 620-2820 or email assistant@alvarez.legal to schedule a consultation.

*Disclaimer: this blog post is not intended to be legal advice. *

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