What Is a Financing Contingency?

(soft music) – Hi, this is Jason Cramerwith Twin Cities Home Buyers, recording a short video here for ya, regarding financing for contingencies.

Basically what are they? How would they affect the transaction? And what, if anythingcan be done about 'em? So basically a financing contingency is a contingency for a purchase agreement where the buyer needs financingto complete the transaction, and they have the opportunity,if they can't qualify for the financing to backout of the agreement.

And so a lot of things can happen that can disrupt that process.

If the buyer's either credit score, isn't sufficient to qualify.

If they've got excess debtor whatever the case may be.

The other thing that might come up is that the property might not appraise.

If the property doesn't appraise, in other words, they agree to pay more than the appraisal value.

This has happened to us recently, where we've actually, themarket price for the property was actually more thanwhat the appraiser thought they could give to the property for value.

So we actually had to lower our price and sell the propertyfor less to the buyer, because they couldn't get the financing at the price that they agreed to pay.

So believe it or not,that's pretty common here.

Actually three of the last transactions where we've had that happen.

And so how do you get around it? Well you can't.

Virtually a hundred percentof the purchase agreements that we see coming throughwith a retail buyer have that financing contingency in place.

And we weren't really ableto do anything around it.

Now when we buy a property, we don't have a financing contingency, so a lot of our customers,what they like is, when they sell a property tous on the agreed upon price we're actually gonna buy it and we don't have financing contingency, so there's no surprises coming in.

You're not gonna have toworry about lowering the price or the deal falling through, and most of these financing contingencies the buyer actually has upuntil the day of the closing to back out of the transaction.

So we've had that happen acouple of different times.

It's not something that wedo when we buy a property.

So a lot of our customers appreciate that.

Thanks for watchin' this videoon financing contingencies.

If you have any questions about this or any other topics,feel free to reach out at any of the contact information below, either telephone or email.

I'd be happy to answer any ofthose questions that you have.

Appreciate you watchin' the video today and have a great day! (soft music).

Source: Youtube