Home Buyer Wants More Time to Get Mortgage Financing: Should I Grant It?

Trying to figure out whether the buyer is truly a good bet to close on the purchase.

Question

I’m in escrow, and the sale of my home is due to close later this week. The purchase contract includes a financing contingency, which basically says that if the buyer doesn’t line up a loan on the terms he hoped for, he can back out at the last minute. He was actually preapproved for a loan, and I understand this is a normal contract term, so I wasn’t worried about it.

Now, I don’t think my buyer is actually looking for a way to back out—he seems eager for the house to be his—but he just asked me for an extension of the financing contingency release date. He didn’t specify what the problem was.

This has me worried. Should I just say “Yes” and hope for the best? My real estate agent seems to think so, but I’d like a second opinion.

Answer

It’s not unheard of for a buyer who is having trouble lining up a loan, or satisfying all the lender’s requirements, to ask you for an extension of time on the financing contingency. Assuming you still want the deal to proceed, you'll likely want to say yes—but only after looking further into whether the buyer will ever successfully get a loan from this particular lender.

It may be the buyer is being flaky, and not working hard enough to gather the needed documents. Or, it may be that the lender is creating the problem, by adding extra demands or not respecting the closing date that's in your purchase and sale contract.

You can definitely ask for more information; or more literally, ask your agent to do so on your behalf.

One thing that real estate agents will commonly do is to say to the buyer’s agent, "We’d like to see the list of conditions.” That means a copy of the lender's stated final conditions for funding the loan; for example, that the borrower provide verification of employment (VOE) and that the appraiser’s report has come in showing a particular home value (or more).

Only a couple of items should remain on this list if you're near the closing date; most should have already been checked off.

But if, for example, the VOE is not yet there, or documents are missing that the buyer could have provided weeks ago, you should view that as a red flag—perhaps the buyer is not as eager as you thought.

There are common situations where the problem is not the buyer’s fault. For example, perhaps the lender has required IRS transcripts instead of copies of tax returns, and the IRS is slow providing these. Or perhaps the lender has been slow to do the required processing to meet the closing date.

In any case, the decision will be up to you regarding whether to grant an extension of time. If you want to end negotiations with this buyer and put your home back on the market for some reason, you can deny the extension and await the closing date, after which you will no longer be in contract.

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