The Importance of Financing Contingencies in the Wake of the COVID Pandemic.

Real Estate Law

The COVID-19 pandemic is changing many things about the way we live and do business and it is bringing a number of issues we might not otherwise have thought about, to the forefront.

In real estate transactions, one of these issues is that of “financing contingencies” in home Purchase and Sale Agreements.

Real Estate and Contingencies.

When it comes to buying real estate, the Purchase and Sales Agreement is the contract entered into between the buyer and the seller. Most Purchase and Sales agreements contain a number of contingencies. A “contingency” in a real estate contract is a condition that must be met, or an action that must be taken, before the contract becomes binding.

Some typical real estate contingencies are:

  • Inspection contingencies
  • Appraisal contingencies
  • Financing contingencies

Common to all contingencies is the fact that if the contingency is not met, the agreement falls apart and there is no deal.

Financing Contingencies.

Financing contingencies in real estate Purchase and Sales agreements typically provide that the contract is contingent upon the buyer being able to get financing for the purchase. This means that if the buyer cannot get the financing he needs, the deal will fall through. Financing contingencies will typically specify the type of loan the buyer will seek (for example, a 30-year loan) and the highest interest rate that will be imposed for that loan.

Most financing contingencies also have a deadline. If the buyer does not properly notify the seller that the buyer has not been able to get the financing he needs by the date specified in the contract, then the contingency expires. The effect of the financing contingency expiring in this way (assuming no other contingency applies) is that the buyer then becomes obligated to close on the contract and to pay any real estate commissions.

COVID-19 and Financing Contingencies

While financing contingencies are nothing new, the COVID-19 pandemic has brought them to the fore of real estate transactions primarily because so many people are now unemployed.

For those who might be in the middle of a purchase transaction, it is important to know that if your ability to repay a loan changes before closing because you have lost your job, the bank can decide to no longer approve your loan.

For those who are in the middle of a purchase transaction but can no longer afford the transaction due to job loss, if your Purchase and Sales Agreement has a financing contingency in it that has not yet expired, it may provide you some protection against  being sued for specific performance by sellers or for commissions by brokers. As long as the financing contingency has not expired, you may want to look into getting a letter from your lender saying that you are no longer qualified for financing; thus invoking the financing contingency. As always, for any real estate issue you may have, you should consult with an experienced real estate attorney.

Real Estate Attorneys in Georgia.  

For more than 20 years, the Law Offices of Mark Weinstein, PC has focused on all aspects of real estate law and litigation. We are located in Cumming, Georgia, but we serve clients in and around Atlanta, Marietta, Roswell, Sandy Springs, Kennesaw, Forsyth County, and a number of other counties in Georgia. Call us at 770-888-7707, or contact us here, or send inquiries by e-mail to:


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