I recently had a deal where the Buyer’s 30 day Financial Contingency was up and my Sellers wanted to ask the Buyers to waive their financial contingency.
My initial reaction was, “In this market?” You see, unlike almost every contingency form in our Northwest Multiple Listing Service Library that has a automatic timeline attached that waives said contingencies once the agreed upon timeline is met, the financial contingency in our MLS forms is not an “automatically deemed satisfied” contingency.
So the Buyers must actually give “notice” (that means in writing) they are in fact, agreeing to waive the condition to purchase the home based on their ability to obtain financing.
The Loophole
Of course, the buyer could simply give notice they are waiving their financial contingency (there’s an addendum for that)…but why? In essence, if the buyer does not give notice they are waiving their contingency, then even after the 30 days has come and gone, if the buyer cannot obtain financing and gives written confirmation of such from their lender, they still have the right to their earnest money.
On top of that, the seller must ask the Buyers to waive their contingency by giving them notice of termination! (You guessed it…there’s an addendum for that as well) So, in order to get the buyer to waive their financial contingency, the seller must threaten termination of the entire agreement to do so! This gives the buyer the right to walk away from the entire deal if they simply do not respond to the sellers request (they have 3 days from delivery of the notice). Oh, and by the way…the Earnest Money is refunded back the Buyer!
The Remedy
So if the buyer refuses to waive their contingency or the seller isn’t quite willing to give notice to terminate in fear the buyer “calls their bluff” isn’t willing to waive their contingency…what’s the seller to do? In most cases, nothing! The financial contingency form is a “leap of faith” form in our library and woefully inadequate to protect the sellers position in the Agreement. But then again, deals close everyday in Washington without the buyers waiving their financial contingency so why bother?
So, Do Your Forms Protect the Seller or the Buyer?
As you can see, the financial contingency form is heavily laden for the buyer in our State. On top of the waiver issue, the buyer is also protected in the event the appraisal comes in below value and can even terminate and be refunded their earnest money if they were unable to obtain a homeowners or property insurance binder. (Yep, there’s an addendum for that too!) So, what would you do for your sellers if you were in my shoes?
