If buyers have passed their buyer approval deadline in the Third Party Financing Addendum (TXR 1901, TREC 40-9), but the available interest rates exceed the maximum amount of interest stated on the addendum, can buyers terminate the contract under the buyer approval paragraph?
In the latest Legal Briefs video, Ryan Bauman, Texas REALTORS® staff attorney, answers that question and explains the negotiation process in Paragraph 2A of the buyer approval section.
Click here to access all the videos in the Legal Briefs series.
Good stuff.
My question is, “Why is the interest rate even in the 3rd party finance addendum?” I understand you to say that the Buyer cannot cancel the contract based on interest rate but only on “loan approval”.
If the buyer cannot obtain an interest rate at or below what is stated in the addendum, they can terminate as long as they are still within the Buyer Approval timeline. Once it is passed that date, they cannot terminate because of the interest rate.
Great informatin to share with both buyers and sellers. Is there a printed explanation we could share! Thank you.
Great explanation
I agree with Evelyn. Why is the interest rate even in paragraph 1 of the Third Party Financing Addendum? Paragraph 2A states buyer approval is obtained when… (i) the terms of the loan described above are available. Is that referring to the terms completed in paragraph 1, which includes the rate? Rates can fluctuate and typically aren’t locked in until closer to closing. Seems like we as agents need to go back to at least 21 days on third party financing for a 30 day close and get away from the 7-14 days in third party financing that we have… Read more »
Why is it in there? Because agents and consumers who understand these contracts/addendums find it very useful. Are you trying to tell us that your clients don’t lock a rate until 9 days before closing?
The rate is a key part of affordability. So it is not just “can the buyer be approved for a loan”, it is can buyer obtain a loan that fits their budget. If rate is not mentioned then no budget is established. This protects the buyer in the event rates go up and thus makes affordability an issue.
Your comment is spot on, however, I think the concern with asking why the rate is even mentioned within the addendum is because the “affordability” of a buyer should be established WELL BEFORE a contract is written and accepted. If financing contingency terminates and the buyer has not discussed the rate lock with their lender, and they aren’t allowed to terminate AFTER the contingency expires, why even mention it I THINK is the question.
Great information
That’s why buyers should get approved before going under contract. Then the only thing left is finding the property that will be approved by their lender.