REO Financing Contingency

**onechionly** · 02-03-2010, 06:50 PM

Hello everyone,
I recently submitted an offer on a REO. They accepted and gave us the contract. My lawyer is reviewed the contract and he is not happy with it. Basically the financing contingency is given up once a commitment letter has been obtained. And from the commitment letter to the closing (which is 5 days, not very long I know) if the bank decides not to lend then I will be found in default and lose my earnest money. I've asked around and it seems that all REO sales are using contracts like this.
Has anyone purchased a REO with a financing contingency similar to mine in place? If so, how does do you cope with the risk associated with the purchase?
Any help with would be greatly appreciated.

**Chrisopher Moltisanti** · 02-04-2010, 12:54 AM

I never have personally, but I wouldn't doubt, especially nowadays, that contracts like yours aren't uncommon.

If I'm reading your comments correctly, the bank has accepted your offer but if you have to finance it, no deal and you don't get your earnest money back. Your lawyer's right: this isn't a deal. Finance it and you lose your deposit....friggin banks, all the same. Anything to drain that last nickle.

How to cope? Well, what does your lawyer say? Will you lose your deposit (let's call it that), before you sign the bank's contract? I don't see how you'll lose that money if you don't sign their stupid contract.

If the answer is "no", then walk away. Fuhgetaboutit.

**onechionly** · 02-04-2010, 04:38 AM

We won't lose our earnest money if we finance the deal. We would only lose our money if we finance the deal obtain a commitment letter and the financing somehow falls through afterwards. In such a case our earnest money will be lost. We are protected by the financing contingency only up to the point where we obtain the commitment. Once we get the commitment we lose all financing contingencies.

The banks are evil but the house we love, the risk might be too great, any help would be appreciated.

**Greg** · 02-04-2010, 05:47 AM

All contracts whether with foreclosures or regular sellers call for the loss of the buyer's earnest money if financing falls through after the loan contigency deadline.

You need to extend the loan commitment time frame out far enough that your lender feels comfortable with getting it done.

This is how the seller finds out if you are unsure about your ability to get financing.

**Chrisopher Moltisanti** · 02-04-2010, 07:12 AM

Extend it like he said, if you say you love the house that much. 5 days isn't enough. Have your lawyer extend it as much as you and he think you'll get....That's all you can do at this point or pay cash for it, -which isn't an option..

Good luck.

**onechionly** · 02-04-2010, 07:49 AM

When we submitted our offer we said we were going to give 10% earnest money. Do you guys think that is way too much? If the earnest money was much lower I would be very comfortable with this deal.

**Chrisopher Moltisanti** · 02-04-2010, 07:58 AM

Personally? Yeah. But you said "we SAID we'd give 10%", you didn't actually do it yet. 10% nowadays with the dollar having no value and housing prices in the trough at an average (up here) of $155k, is a very large amount. You must really want this place.

If you said you'd feel comfortable with this "deal", if the amount were lower, that proves it's too much, doesn't it?

No sfh is worth all this crap from the machine.