Step 24 To Selling a Home: The End of the Financing Contingency

Unless the contract includes a contingency on your buyer's current home closing, it's likely that the final contingency hurdle that we have to clear in selling your home is the buyer's financing.

On the last day of the buyer's financing contingency, we formally request Proof of the Buyer's Ability to Close, as outlined in the financing contingency exhibit to the contract. As long as the financing contingency period ends 7 or more days before closing, we can ask for a copy of the buyer's conditional approval letter from the lender. “Conditional approval,” as it relates to a buyer's financing, means that the lender has most of the information that they need in order to fully approve the mortgage loan. The loan officer or loan processor has turned in the file, with all of your supporting documentation, to the underwriter, and the underwriter has given conditional approval…with certain conditions outstanding.

What are the conditions? 

The conditions can vary, based on the borrower. It may be that the underwriter doesn’t yet have proof that the buyer has set up their homeowner’s insurance; it may be that one of the conditions is one final pull of the buyer's credit (it's not uncommon these days for the lender to pull the buyer's credit one additional time in the few days before closing; it may be that the underwriter is requiring one final call to the buyer's Human Resources department to verify their employment the day before closing. These are fairly common conditions.

Other conditions can be more major and stringent: it may be that the buyer need to eliminate some debt or pay off a credit card prior to closing; it may be that the lender has not yet successfully received the buyer's tax transcripts from the IRS.

Regardless of what these conditions are, conditional approval is the minimum result that we are seeking during the Financing Contingency Period. 

If, prior to the end of the Financing Contingency Period, the lender needs more time to work out any of those conditions, the buyer may ask you to grant them an extension. You are not required to agree to an extension, and we will gather as much information as we can from the lender, discuss the request with you, and help you to make an educated decision. (Requests for extensions are not always a stall tactic; occasionally the lender simply needs a few extra days to get to conditional approval.) 

In the event that the lender denies financing to the buyer, there may be options to save the transaction. Depending on the circumstance and the buyer's willingness to work hard to be able to purchase your house, we may consider options such as allowing the buyer to change lenders or allowing the buyer to change financing types. Again, you are not required to agree to any of these changes, and we will gather as much information as we can from the lender, discuss the request with you, and help you to make an educated decision. 

If the lender denies financing to the buyer in the form of a formal written denial that meets the criteria set forth in the financing exhibit, the buyer does have the right to retain their claim to their earnest money. We hope that doesn't happen on your transaction, but if it does, we will help you to cross that bridge when we get to it!

Let's end this step on a positive note, though!

In the overwhelming majority of cases, if the buyer was well qualified when they wrote the offer on your home (which we do our best to confirm before you enter into the contract) and if we've gotten through due diligence and the appraisal contingency, it's highly likely we will get through the Financing Contingency Period successfully, which means closing is just around the corner! This is certainly cause for (cautiously optimistic) celebration and you should allow yourself to do a little happy dance when we deliver this news to you!