Can you terminate the contract if the buyer hasn’t secured approval?

May 01, 2024

What constitutes buyer approval?

A buyer obtains buyer approval when both of the following conditions are met:

The terms of the loan(s) described in Paragraph 1 of the Third Party Financing Addendum are available
The lender determines that the buyer has satisfied all of the lender’s requirements related to the buyer’s assets, income, and credit history.

Can a seller terminate the contract and receive the earnest money if the buyer has not secured buyer approval within the number of days specified in Paragraph 2A of the Third Party Financing Addendum (TXR 1901, TREC 40-10)?

Answer: No, the seller cannot terminate the contract for this reason. Paragraph 2A of the Third Party Financing Addendum allows the buyer, not the seller, to terminate if the buyer has not received buyer approval of financing within the specified time period. If the buyer has not secured buyer approval within the time period specified in Paragraph 2A, the buyer is unable to terminate for failure to obtain buyer approval, but the buyer should still be afforded the opportunity to close.

If the buyer is unable to close because of a failure to secure financing and is unable to meet the requirements to terminate under another provision of the Third Party Financing Addendum, the buyer will be in default for failure to close by the closing date. Pursuant to Paragraph 15 of the One to Four Family Contract (Resale) (TXR 1601, TREC 20-17) or the Farm and Ranch Contract (TXR 1701, TREC 25-15), the seller will then have the remedy of terminating the contract and receiving the earnest money.

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