What do you do when a buyer’s finance isn’t going to be approved by the latest date?
If you’re like many of the agents we deal with you probably get the buyer and seller to sign a contract variation extending the latest date for finance approval.
It seems like the right thing to do, and to the extent that it protects the buyer’s interest, it is.
But there are other options.
Clause 1.3 of the REIWA offer and acceptance (02/14 edition) establishes that the contract remains in full force and effect even after the latest time for finance approval and until either it’s terminated by the seller or the buyer provides a Non Approval Notice.
That means that if the buyer hasn’t obtained finance approval by the due date the deal is still live. Although it can’t proceed until finance has been approved, once an Approval Notice is sent, the contract can proceed as planned without the need for a contract variation.
Of course, without a variation extending the approval date, the buyer risks the seller terminating the contract, which is their right.
But, until that happens, the buyer is able to continue their efforts to obtain finance approval despite the passing of the due date.
So when next you have a finance approval date that is about to expire let your seller know they have three options:
- Grant an extension. This will reset the clock for the period of the extension.
- Do nothing. This option allows the buyers to continue to obtain finance approval but it also keeps the termination option open for the seller.
- Terminate the contract. This option brings the contract to an immediate end with the deposit being refunded to the buyer.
Have a great day.