In Georgia, real estate contracts are written so there are safeguards and protection built into the real estate contract(s) for the benefit of both parties. We have written about due diligence periods, and appraisal contingencies to name a few. Another important safeguard is the financing contingency. This contingency protects the buyer and their ability to secure a suitable loan for the subject property.
Just because a buyer(s) has a pre approval letter, that in itself does not guarantee a loan. All of the terms and the conditions of the lending institution must be met. In many cases the vetting process has changed over the past several years and there is no absolute guarantee the loan will be secured. It must go through the approval process.
This process to convert the pre approval letter to a secure loan can take several weeks. When we submit a purchase and sale agreement representing the buyer we typically put in a 21 day contingency period. This can vary based on the complexity of the loan or any backlogs in the lender’s underwriting department. The clock starts ticking once there is a binding agreement signed by both parties. If necessary the agreed upon time can be extended with written consent by both the buyer and seller.
Once the loan is approved the financing, contingency is lifted. If the buyer is not approved by their lender, the buyer has the right to be refunded their earnest money which is held by the sellers brokerage firm. A letter from the financial institution needs to accompany the check refund process stating that the lender declined the loan to the purchaser.
In order to approve the loan the lender requires a legible copy of the signed and binding purchase and sales agreement, a copy of the sellers disclosure(s), a satisfactory search of title record, an acceptable appraisal and buyer(s) who are deemed credit worthy.
For calendar year 2012 we at Savannah List for less have been involved in over 50 sides of a transaction. Perhaps in two transactions during the year, did we have any delays relevant to the loan packages. In both cases, we were delayed by a day or so. Lenders are lending money to qualified buyers. Make sure you have a REALTOR who knows the process, so everything moves along smoothly.
I hope everyone had a safe and nice new year. We at Savannah List for Less believe 2013 will be a good year for real estate with prices stabilizing or rising slightly and inventories shrinking. When purchasing or selling a home, always remember to use a local and reliable REALTOR.
Pete Chaison is co owner of Savannah List for Less and can be reached at 912.313.2759 or firstname.lastname@example.org