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

A lot of issues can come up during the weeks that you're in escrow to sell your home, usually based on contingencies that the buyers put into their purchase contract. Dealing with these can take you petrifyingly near to the closing date. Let's say, for example, that the purchase contract includes a financing contingency, basically saying that if the buyer doesn't line up a loan on the terms he hoped for, he can back out up to a set deadline.

Then the buyer asks for an extension of the financing contingency release date, without specifying the underlying problem. Should you just say "Yes" and hope for the best? That's what we'll discuss here, including:

• reviewing what you know about the buyer's motivations, and
• taking steps to find out how actively the buyer is actually seeking the loan.

We'll discuss both of those here.

Has the Homebuyer Gotten Cold Feet?

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 for an extension of time on the financing contingency. So, this might be "normal" rather than cause for alarm.

But there could be any number of factors at play here. For instance, it's possible that the buyer is actually looking for a way to back out of the sale. Contract contingencies offer a convenient way to do this, and it might be difficult for you to know how sincere the buyer is.

Or, it might be the buyer is being flaky in working with the prospective lender, and is not working hard enough to gather the needed documents to obtain the mortgage. Or, it might 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.

Assuming you still want the deal to proceed, you'll likely want to say yes to the extension of time—but only after looking further into whether the buyer will ever successfully get a loan. You can definitely ask for more information; or more literally, ask your agent to do so on your behalf, as described next.

Is the Buyer Is Truly Trying to Get the Loan?

One thing real estate agents 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.

Understand the Reasons the Delay Might Not Be the Buyer's Fault

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 in providing these. Or perhaps the lender has been slow in carrying out 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.