13 Sep What does “subject to financing” mean?
You find your dream home on Funda and immediately contact the real estate agent to schedule a viewing. However, the agent informs you that the house has been sold “subject to financing.” You might feel discouraged, but how likely is it that the financing might fall through? In this article, we explain what “sold subject to financing” means and what steps to take.
What does “sold subject to financing” mean?
“Sold subject to financing” indicates that the buyer and seller have agreed on the price, but with certain conditions that could cancel the sale. One of these conditions is the buyer securing financing (usually a mortgage). This means that if the buyer cannot finalize their mortgage by a specified date, the sale will not proceed. Importantly, the amount of the mortgage must be clearly stated in this agreement. Without including a financing condition, the buyer may be liable to pay 10% of the purchase price if they fail to secure the mortgage.
Duration of the “subject to financing” condition
The typical duration for this condition is six weeks, which is usually stated in the purchase agreement. If the buyer cannot secure financing within this time, it’s not necessarily a disaster. Often, the period can be extended by mutual agreement. A study by Vastgoed Actueel in 2017 showed that 25% of buyers were unable to secure financing within six weeks. Additionally, research by Accelerate indicated that mortgage processing times can extend up to nine weeks. This means a delay of three weeks, even if the buyer has the financial means, due to the lender not processing the application in time.
Consult a mortgage advisor
It’s a good idea to have an initial consultation with a mortgage advisor before scheduling a viewing. A mortgage advisor can inform you about the documents you’ll need and provide an overview of your financial possibilities.
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