Legal Ease
Understanding FINANCIAL CONTINGENCIES
SOME OF THE QUESTIONS MOST FREQUENTLY ASKED BY REALTORS® INANCIAL PERTAIN TOTHE VARIOUS FINANCING CONTINGENCY EXHIBITS CONTAINED IN THE GAR FORMS. TO BUYERS, A FINANCING CONTINGENCY SHOULD BE SIMPLE AND STRAIGHTFORWARD. BUYERS WANT THE OPPORTUNITY TO CONFIRM THAT THEY CAN OBTAIN NEEDED MORTGAGE FINANCING BEFORE THEY ARE OBLIGATED ON A PURCHASE AND SALE AGREEMENT. OF COURSE, THINGS CAN QUICKLY GET COMPLICATED SINCE BUYERS DO NOT ALWAYS KNOW THE TYPE OF LOAN THEY WANT, AND SELLERS DO NOT NORMALLY GIVE BUYERS AN UNLIMITED AMOUNT OF TIME TO GET A LOAN. ADDITIONALLY, LENDERS SOMETIMES CHANGE THEIR MINDS ABOUT MAKING A LOAN OR HOW THEY VALUE THE REAL PROPERTY, WHICH IS THE COLLATERAL FOR THE LOAN. AS A RESULT, MANY DISPUTES IN REAL ESTATE CONTRACTS RELATE TO THE WORKINGS OF FINANCING CONTINGENCIES. IN A QUESTION AND ANSWER FORMAT, THIS ARTICLE WILL TRY TO EXPLAIN IN GREATER DETAIL THE ISSUES WHICH CAN ARISE WITH FINANCING CONTINGENCIES.
1 >> If my client does not know the loan terms that he or she will be applying for, can he or she leave it blank in the purchase and sale agreement?
The answer to this question is no. It is well-established Georgia law that if a real estate sales contract contains a financing contingency, it must be definite and certain to create an enforceable contract. This means that the amount, type of loan, and interest rate must either be specifically identified or the contract must contain a method by which they can be precisely determined. For example, a loan equal to 80 percent of the purchase price is sufficiently definite and certain since the amount of the loan is subject to precise calculation. The one exception to the rule that mortgage loan terms in a financing contingency must be specific is that our Georgia courts have enforced financing contingencies in which the interest rate on a mortgage loan was identified as the “prevailing rate”.
www.garealtor.com GEORGIA REALTOR® I 13
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37