A finance contingency clause in a contract allows a buyer to withdraw from an agreement without penalty if they are unable to secure financing within a specified timeframe. This provision ensures that the buyer is not obligated to complete the purchase if they cannot obtain the necessary loan or mortgage approval.
2) DOWN PAYMENT: N/A – No Finance Contingency
v. Equity Advance If you find a home in the new location, you may request an equity advance for a down payment on the purchase, as long as you have a signed purchase contract on your current residence and it has been signed by SIRVA as the Seller. Once you satisfy all the requirements for an equity advance, including any finance contingency, SIRVA will provide you with the necessary paperwork for this request. You may request up to 90% of your equity at this time and the remainder will be available to you after the closing on your current residence. Brighthouse Services, LLC reserves the right to decide, in its sole discretion, whether to grant any request for an equity advance and to determine the amount of any equity advance.
(e)Cancellation Fees and Expenses. In the event that the Closing does not occur at the time and in the manner provided in this Agreement because of the default of one of the parties, then in addition to the remedies granted to Buyer and Seller under Section 19 or 20 hereof, as applicable, all costs of cancellation will be paid by the defaulting party. If Buyer terminates or is deemed to have terminated this Agreement during the Due Diligence Period or the Finance Contingency Period, any cancellation fees of Escrow Holder or relating to the issuance of any title reports or commitments shall be the responsibility of Buyer.
3.4 No Finance Contingency. Buyer expressly agrees and acknowledges that Buyer's obligations hereunder are not in any way conditioned upon or qualified by Buyer's ability to obtain financing of any type or nature whatsoever (i.e., whether by way of debt financing or equity investment, or otherwise) to consummate the transaction contemplated hereby however, Buyer is permitted to obtain financing and Seller will cooperate with Buyer and Buyer's lender with respect to same but such cooperation shall not constitute a waiver of Buyers rights as set forth herein nor deemed a modification thereof.
Finance contingency is a clause commonly included in real estate contracts to protect the buyer. This clause allows the buyer to back out of the purchase if they are unable to secure financing for the property. In essence, it makes the completion of the transaction contingent upon the buyer obtaining a loan or mortgage. If the buyer fails to secure financing within a specified timeframe, they can withdraw from the contract without losing their earnest money deposit.
You should use a finance contingency when you are dependent on securing a mortgage or loan to purchase a property. This clause is particularly important for buyers who need to ensure that they can obtain the necessary funding before committing to the purchase. Including this contingency provides peace of mind and financial protection, as it allows you to cancel the contract without significant financial loss if your loan application is denied or the terms are unfavorable.
When writing a finance contingency, it is crucial to include specific details to make it clear and enforceable. Here is an example of how to write a finance contingency clause:
“This offer is contingent upon the Buyer obtaining a conventional mortgage loan in the amount of $[Loan Amount] with an interest rate not to exceed [Interest Rate]% per annum, for a term of [Loan Term] years. The Buyer shall have [Number of Days] days from the effective date of this contract to obtain a written commitment for financing. If the Buyer is unable to secure financing within this period, the Buyer may terminate this contract by providing written notice to the Seller and the earnest money deposit shall be returned to the Buyer.”
Make sure to adapt the specifics (loan amount, interest rate, loan term, and number of days) to your particular situation.
Finance contingencies are typically found in real estate purchase agreements. These contracts include various terms and conditions governing the sale of property, including inspection contingencies, appraisal contingencies, and, importantly, finance contingencies. While they can vary from one transaction to another, it is common practice to include a finance contingency in any contract where the buyer is not paying in full with cash and needs to obtain a mortgage or other financing to complete the purchase.
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Dive deeper into the world of clauses and learn more about these other clauses that are used in real contracts.
A financing contingency is a contract clause that allows a buyer to cancel a purchase agreement without penalty if they are unable to secure the necessary financing within a specified timeframe. This provision protects the buyer by ensuring they are not obligated to complete the transaction if they cannot obtain a loan or suitable financing terms.
The "First Right of Refusal" clause grants a party the opportunity to enter into a business transaction with the owner of an asset before the owner is entitled to enter into that transaction with a third party. If the holder of this right declines, the owner is then free to negotiate with other potential buyers or parties.
A force majeure clause relieves parties from fulfilling contractual obligations when extraordinary events or circumstances beyond their control, such as natural disasters, war, or pandemics, occur, making performance impracticable or impossible. This provision typically outlines the specific events covered, the procedure for invoking the clause, and the consequences for both parties.
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