“Sellers Right to Terminate”

“Seller’s Right to Terminate”
By Steve Meyers
February 29, 2016

The most recent Financing Addendum to the Purchase and Sale Agreement includes new language in Section 2 titled the Seller’s Right to Terminate.   Here is the new language.

a.Right to Terminate Notice: “At any time ______ days (30 days if not filled in) after mutual acceptance, Seller may give notice to Buyer that Seller may terminate the Agreement at any time 3 days after delivery of that notice (the Right to Terminate Notice)”.

b.Terminate Notice.  “If buyer has not previously waived the Financing Contingency, Seller may give notice of termination of this Agreement (the “Termination Notice”) any time following 3 days after delivery of the Right to Terminate Notice.  If Seller gives the Termination Notice before the Buyer has waived the Financing Contingency, this Agreement is terminated and the Earnest Money shall be refunded to Buyer”.  If not waived, the Financing Contingency shall survive the Closing Date.

What does this mean for the Seller?  Once the “Right to Terminate Notice” is provided to the Buyer, the Buyer must waive their financing contingency.  The Buyer has no further ability to terminate the transaction based upon any items within the Financing Contingency.  If the Buyer does not waive this contingency, the Seller can provide the “Termination Notice” and return the earnest money to the Buyer.

Why would the Seller terminate the transaction? If for whatever reason the Seller does not feel comfortable with the Buyers efforts to obtain financing, the Seller can use this “Right to Terminate” to force the Buyer to waive his / her financing contingency.   The Seller may also exercise this “Right to Terminate “  if they received another Offer to Purchase with better terms and conditions as the current Agreement.

What does this mean for the Buyer?  The Buyer needs to actively secure financing for the property prior to the Seller providing the “Termination Notice”.  If they have secured the financing from their Lender such that they are confident that the loan will fund at Closing, they will minimize the risk of losing their earnest money.  Once the Buyer waives their Financing Contingency, he / she can no longer terminate the Agreement based upon anything within that Agreement.  If the transaction fails to Close because of one of those elements in the Financing Agreement, they risk losing their earnest money deposit.

If you have any comments or questions about this article, please email me at smeyers@kw.com.  If you know of someone who would also like the information in this article, please forward it to them.You can find other articles I’ve written at  www.ourseattlehome.wordpress.com.

Steve Meyers is a Managing Broker at Keller Williams Realty in Seattle, Washington. He can be reached at (206) 972-3328 or smeyers@kw.com.

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