Hi all,

I am usually a lurker on here but have found myself in a situation where I need some help.

I have a buyer who wants to extend his closing date due to financing falling through but the seller is not willing to comply. My buyer is now threatening lis pendins, and the seller now wants a full price offer before they will agree to the extension. My superior told me that in TAR there is a clause that allows for a 7 day grace period after the effective closing date to the contract. Has anyone heard of that? And can anyone give me some advice? I am a fairly new agent and am not sure what to do next.

Any help would be appreciated.

In Texas,
Hank

What is TAR? I would think that all that matters is what is written in your contract, unless the state of Texas also requires grace periods before terminating all contracts.
Some offer & acceptance agreements have a written amount of time a contract can be automatically extended. If yours does not, my assumption would be that you do not have the right to extend, and my non-legal-mind assumption would also be that your buyer has no right to lis pendens. The buyer is out of contract, the buyer has defaulted.

The thing I would do in this situation is just let the seller do what he must, and find a lender who will save this deal in a matter of days. Then come back to the seller and find out if he still wants to close, or if he wants to watch his house sit on the market and enter another possible 30 day escrow with a different buyer.
--A

Thanks for replying A,

TAR is the Texas Association of Realtors. The buyer had multiple offers the first day his house was listed so I know it won't sit on the market. My buyer gave 10,000$ earnest money as well...so this should get interesting.

Thanks again,
Hank

Hank,
Read the contract! I agree with Upscale you need to find a lender that can close on the due date. Since I am not familiar with TAR contracts I cannot comment on the presence of the 7 day clause you mentioned except to say what good is a due date if there is a grace period.

Without that clause your buyer is SOL if the seller refuses to extend the closing date. Your buyer has no legal grounds to file a lis pendins on the sellers home and if he did the sellers lawyer is gonna be collecting a big check from your buyer.

Your buyer has two choices.
1. You and the buyer need to find a new lender that can close this on the due date.
2. Your buyer needs offer some extra dollars for the sellers inconvience.

Sorry there is a third choice and that is walk away based on a finance contingency.

In our contracts for purchase, if the buyer is unable to obtain the financing the lender approved them for, then they are entitled to the earnest money back.

Josh

Hank i hate to say this but you should have NEVER let your buyer put 10k down as earnest money without a full approval from the lender.There is a difference between a lender asking a few questions on the phone and actually pulling bank statements,looking at tax returns,verifying length of employment,looking at pay stubs etc. to give a full apporval letter.


It all depends on the contract as to who gets the earnest money.If in special stips it says it is non-refundable for any reason than the stip overrides or voids any pre-printed provisions in the contract.Have your broker or a local attorney to review the contract to see what the options are.

not giving legal advice

The TAR contract does have some built-in extensions but those are for unexpected things such as the occurance of a casualty loss. Has your buyer's finance contingency already expired? Is the reason that the financing fell apart something that can be corrected/overcome? Will changing lenders even solve the problem? How many days until you're scheduled to close?

Talk to your broker and maybe with a couple of the producers in your office....see if they can recommend a LO that can get this closed on time for you. This, of course, assumes that the issue with the first lender is with the lender and NOT with your buyer.

If a lender can't get this closed on time, you'll need to tell your client to seek professional legal advice....if the closing date is rapidly approaching, you may want to have them contact an atty now. The first thing your client is going to ask you is how they get their EM back. DO NOT attempt to give legal advice to your client. Keep in mind that the new TAR contracts contain changes with regard to EM disputes.

Please keep us posted on progress.

Thank you for all your advice. Super realtor, I never encouraged him to give that much money, he is an investor with a sort of "flair" about him. He told me he would be paying cash if financing did not become available and then proceeded to give $10,000 earnest (despite my objections). Well now that closing is almost upon us he has changed his mind and wants financing. On the contract it was treated as cash only. So I guess we will wait and see. Thanks again everyone. Hank

Hank is this a bank property or pre-foreclosure by any chance?

It sounds like it is,your investor cannot bait and switch a bank.What investors have done around here in the past is this.They submit an offer of cash with a fast closing then the bank accepts the lower offer based on those terms then the investor quickly changes to financing the loan.Why would an investor do this,it's simple.

They offer all cash to get the bank to accept a certain price but if they paid all cash they would have all there money into one deal.So they want to switch to financing to buy 3 properties instead of one.

Banks have caught onto this scheme and now how in there contract addendums that if the financing terms are changed in the contract from cash to financing the bank can deem the contract NULL & VOID at it's own discretion.

I wouldn't believe anything this investor says.I hope your objections aren't verbal because i can almost gurantee he will say it never happened or he didn't say that and will blame you.

Always get everything in writing.Hopefully you had him sign a statement acknowledging that buyer might not recieve earnest money back and that you advicsed against it.Same with a home warranty or inspection,if they say they didn't want it get a form signed by them stating that to cya.

good luck

not giving legal advice