Taking Control of Cash and Financing Offers

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Buyer’s Financing Can’t Be Met, Now What?

Let’s say you receive an offer on your listing conditional on the buyer obtaining a mortgage. In discussing the offer, your salesperson has no information on whether the buyer has been pre-qualified to buy. You still decide to negotiate and accept the offer. After all, you reason, if the buyer’s financing condition can’t be met, the home can go back on the market. What’s more, your salesperson can publish on MLS that the property can continue to be shown to other buyers.

Buyer Claims Financing is Approved, Now What?

What if the Buyer removes his mortgage condition? What assurance do you have that he has, in fact, been approved for the mortgage? At times a buyer will remove his financing condition without having the financing in place. He doesn’t want the condition to expire making the offer null and void, especially if there is the chance of another offer waiting in the wings. If you accept the offer as written, the buyer has total control and you can only hope the deal will close. Of course the buyer continues looking for financing.

How Does This Happen?

This scenario sometime happens. Either the buyer’s agent has not made enough of an effort to have the buyer pre-qualified or the buyer will not share any information regarding his financial ability to buy.

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As a suggestion, why not assume more control. Here’s how. Counter offer to the buyer with something similar to the following: “Upon the buyer removing his mortgage condition, this offer is further conditional upon the Seller receiving written verification from the buyer’s lender that the mortgage has indeed been approved without conditions. Unless the Seller gives notice to the buyer not later than one (1) day from the buyer removing his mortgage condition, this offer shall become null and void and the Buyer’s deposit is returned.”
This way you maintain some control and you have received 3rd party confirmation of mortgage approval.

What About Cash Offers?

Consider something similar with cash offers. Over 90% of all purchases require some kind of financing. Yet some buyers, without checking things out with their lender, choose to make a cash offer. Usually on the basis that once the offer is accepted, if no other conditions exist in the offer, the home is sold. But is it? Sometimes this backfires and funds aren’t available on closing. At times buyers also make cash offers in an effort to beat out the competing offers. As well, with a cash offer the buyer hopes to avoid or minimize negotiations on price. In either case, the same risk applies as above.

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So before You Accept a Cash Offer, why not consider including a similar condition stating something like the following: “This Offer is conditional upon the Seller receiving written verification from the buyer’s lender, that the buyer has the money in place and on account to close on the purchase of this property without the need of a bank appraisal; otherwise this Offer shall be null and void and the buyer’s deposit returned. Once again you arm yourself with some assurance of closing, especially if you are also buying.