Each Agreement of Purchase and Sale presents special challenges. The financing condition that accompanies the agreement is of special importance. This article discusses the elements of the financing clause.
Contract Conditions: Financing
When writing up an Agreement of Purchase and Sale, you need to be aware of the elements of the conditions used in the contract. The financing clause is frequently placed at the top of the page for good reason. Without adequate financing most people do not have the funds available to purchase a home.
This is an example of the wording of a financing condition; This Offer is conditional upon the Buyer arranging satisfactory financing, at the Buyer's expense, within 5 Banking days of acceptance of this Offer, failing which this agreement shall become null and void and the Buyer's deposit shall be returned in full, without interest or deduction. Buyer reserves the right to waive this condition.
It is important to notice that it's common for financing to be paid for by the buyer. Remember that financing is for the Buyer's benefit. It is the ability to acquire the funds necessary to purchase a home that the Buyer requires in order to make their dream of home ownership come true. Depending on your financial standing you may have to pay fees to your lender for lenders fees, appraisal services, and credit reports.
Second it is imperative that you leave yourself adequate time to secure financing. Prior to even writing an offer you should have been to your lender and gotten a pre-approval. This will give you an idea what you can afford when looking at property. It is also important for the seller to not have the home tied up with an offer any longer than necessary. Usually most people can secure financing in 3 or 4 days.
The final portion of the condition allows the Buyer to get his deposit on the home returned if they fail to secure financing. This is the most important part of the wording of the condition, were the buyer is concerned. It protects the Buyer from failure to secure financing and allows the Buyer to walk away from a Real Estate transaction without penalty to themselves.
Whether you're a Buyer or a Seller it is important to understand the financing condition on the Agreement you are about to sign. Is it adequate or does it tie the home up to long? Can the Buyer escape the contract without penalty? These are just two questions that the Buyer and Seller must satisfy prior to agreeing to accept a condition.
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