The Best of the Legal Hotline: Financing FAQ for Fun

 Tracy Rucka  |    February 15, 2021
Legal Hotline

The deadline for the loan commitment is approaching in the transaction. After the inspection, the buyer and seller went back and forth with amendments about issues identified in the inspection reports. Given they are at an impasse, the buyer has stopped communicating with the cooperating agent. The seller is convinced the buyer has walked away from the transaction. The seller wants to terminate the offer. Can the seller terminate the offer if the loan commitment is late? 

Yes. Under the terms of the Financing Commitment Contingency, once the deadline for delivery of the buyer’s loan commitment passes, the seller may deliver a notice of termination as long as the seller delivers it before actual receipt of a buyer’s loan commitment. See lines 281-283 of the WB-11 Residential Offer to Purchase. The seller may include a cancellation agreement and mutual release with the notice of termination for the buyer’s signature. 

The buyer is purchasing a home, and the buyer’s offer includes a Financing Commitment Contingency. The buyer’s REALTOR® was told to release the contingency as the buyer has a clear to close on his loan. The agent wrote a notice, which stated, “Buyer is hereby giving notice that the following contingencies have been met and he is hereby releasing them: 1. Appraisal 2. Financing.”

The listing agent and the seller refused to accept this as removing the Financing Commitment Contingency. The seller requested the buyer to show the loan commitment. The seller would also be open to proof of funds. The seller has a secondary offer, so the seller is not concerned if the primary offer is terminated.  The buyer does not want to lose the house. What is required for the buyer to avoid termination? Does the buyer have to provide a financial commitment along with a notice? Can the buyer just provide notice to waive off the Financing Commitment Contingency?

The buyer may not unilaterally waive the Financing Commitment Contingency in the WB-11 Residential Offer to Purchase. According to the offer, the buyer has agreed to provide the seller with a loan commitment. To satisfy the contingency, the buyer follows the steps stated on lines 272-277 of the WB-11. If the loan commitment is not timely provided, the seller has the right to terminate the offer. The buyer may alternately amend the offer to remove the Financing Commitment Contingency if the seller will agree. In an amendment, the buyer may provide a proof of funds letter to persuade the seller to agree to the amendment. The buyer may not, without the seller’s approval, substitute a proof of funds letter for a loan commitment. Lines 272-277 provide:

This contingency shall be satisfied if, after Buyer’s review, Buyer delivers to Seller a copy of a written loan commitment (even if subject to conditions) that is:

(1) signed by Buyer; or

(2) accompanied by Buyer’s written direction for delivery.

Delivery of a loan commitment by Buyer’s lender or delivery accompanied by a notice of unacceptability shall not satisfy this contingency.

The Appraisal Contingency works differently; it is deemed satisfied if the buyer does not timely deliver a copy of the appraisal report and a notice objecting to the appraised value. See lines 312-314 of the WB-11. The Appraisal Contingency is satisfied by passage of time, not with a written notice to waive. 

This contingency shall be deemed satisfied unless Buyer, within ________ days after acceptance, delivers to Seller a copy of the appraisal report indicating an appraised value less than the agreed upon purchase price, and a written notice objecting to the appraised value.

For more information about the WB-11, see pages 1-4 of the October 2019 Legal Update, “WB-11 Residential Offer to Purchase — 2020 Edition — Part 2,” at
A buyer wrote an offer on a four-unit property intending to occupy one unit. Although the transaction is scheduled to close soon, the buyer has not yet issued a loan commitment. The deadline for closing may also be in jeopardy because the appraisal may not be completed in time. The buyer verbally asked for the seller to issue notice to one of the month-to-month tenants to terminate the tenancy so the buyer can occupy the unit. The seller has indicated she does not want to do this because if this transaction fails to close, the seller will end up with a vacant unit. If the loan commitment is late, does the offer become null and void? If the buyer does not close, is the offer null and void?

If the buyer cannot deliver a loan commitment by the deadline in the offer, per the terms of the Financing Commitment Contingency, the offer is not automatically null and void. But instead, it gives the seller a right to terminate the offer by written notice until the seller is in receipt of a loan commitment. If the seller is concerned about the buyer’s ability to perform by the closing date, the seller may terminate the offer if a loan commitment is late. Alternately, if the seller does not terminate the offer and the buyer does not obtain financing, eventually the closing deadline will come and go without a closing. Again, the seller will have the right, now due to the default provisions, to terminate the offer by written notice for the buyer’s failure to timely close the transaction. At any point during the transaction, the buyer and the seller may attempt to renegotiate by written amendment. Per both license law and the REALTOR® Code of Ethics, the brokers should be putting the parties’ requests to amend in writing. Examples include amendments to extend the financing commitment deadline, requests to have the seller issue notice of termination to a tenant, amending the deadline for the Appraisal Contingency, and/or extending the closing date. 

The buyer submitted a “cash” offer. Per the buyer’s direction, duplicative language was added to the offer to state, “This offer is not contingent upon financing, however, a loan will be obtained by buyer prior to closing.” Furthermore, the accepted counter required a preapproval letter. The buyer submitted a preapproval letter plus proof of enough cash to cover the percentage down, therefore claiming proof of the entire purchase price. Now, the seller claims that the seller had no idea the buyer was attempting to finance the home, and the seller does not want to allow access for the appraiser. The seller is demanding additional earnest money to allow the appraiser access. What is the correct resolution in this scenario?

When a buyer uses the most recent WB-11 Residential Offer to Purchase with a mandatory use date of September 1, 2020, and does not include a Financing Commitment Contingency, then lines 296-307 regarding, “If This Offer is Not Contingent on Financing Commitment” automatically are included as terms of the offer. For offers not contingent on financing, a buyer agrees to provide verification of funds or other documentation as described at lines 300-301 to the seller within seven days, which is the default timing, of acceptance. It does not mean that a buyer cannot seek a mortgage or other financing to purchase the property but means that the buyer does not need the protection of a Financing Commitment Contingency. If the buyer does not provide written verification from a financial institution or third party in control of the buyer’s funds or other negotiated documentation within the deadline, the seller can terminate the offer by delivering written notice the buyer. If a preapproval letter is included at lines 300-301, or in a counter-offer referring to the applicable lines, the buyer may negotiate for the option to provide either a preapproval letter or proof of funds as described at lines 298-299. 

As for access by the appraiser, the seller may be referred to lines 296-307 of the offer that state, “Seller agrees to allow Buyer’s appraiser access to Property for purposes of an appraisal.” An amendment to the offer is not required for this access. 

Tracy Rucka is Director of Professional Standards and Practices for the WRA. 

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