When a buyer sits down with their broker and crafts a purchase agreement to be presented to a seller, they are essentially saying to the seller, “here are the terms we are offering AND here are the rules we agree to play by.”  I am specifically referring to certain addendums that Realtors® routinely include as part of a purchase and sale agreement, such as the Financing Addendum.  It is especially disheartening when a buyer is surprised or even offended when the seller adheres to the rules the buyer established.  Let me explain.

     In the state-wide Financing Addendum, the buyer is essentially saying, ”I can’t make this purchase unless I go to the bank and get a loan. You agree to give my earnest money back if I can’t get financing.  But here are the rules we’ll play by;  I will apply for a certain type of loan and agree to put a certain amount of money down.  I will make application for that loan within 5 days of agreement and will not change the lender or type of loan without written permission from the seller.  If I do, this contingency is waived and I forfeit my earnest money if I cannot close.  Furthermore, in 10 days from agreement, the listing broker may request loan information which I agree to provide within 3 days from that written request.  If I fail to provide that information in 3 days, the seller may give me the Right to Terminate Notice immediately.  Otherwise, within 30 days from acceptance (or other amount of days) you may automatically deliver to me the Right to Terminate Notice.”

     Many buyer brokers become upset when a listing broker actually delivers the Right To Terminate Notice, as if the seller was acting meanly.  This reaction is puzzling to me since the buyer is the one who initiated the rules they would both play by.   I guess they never read or understood what they were having the buyer sign.  What it means in a nutshell is that the buyer must then remove their financing contingency OR take the risk that the seller MAY exercise the right to terminate at anytime up to the closing date. 

     When the buyer removes their financing contingency, the seller cannot terminate the deal, but the buyer’s earnest money is no longer protected by the financing contingency.  Now they have skin in the game like they arranged when they signed the agreement!