Can a Buyer Change Financing During Escrow?

Westcoe Realtors, Riverside Ca…When a buyer makes an offer to purchase a seller’s home, there is great consideration given to how the buyer financially intends to complete the sale…and the type of financing the buyer intends to get can have a definite bearing on the seller’s desire to accept the buyer’s offer.

So…once an offer has been accepted and escrow is opened, can the buyer simply change their financing to something new…something different than what was originally stated in the purchase agreement?

In short…yes…but they do so at their own risk, and the seller is not obligated to go along with this change. Allow us to explain.

The type of financing a buyer chooses to purchase a home can be a very big deal to the seller…and can be a good reflection on how easy (or hard) the loan will be for the buyer to obtain.

As an example, if a buyer stipulates in the original offer that they are putting 50% of the price down in cash, and getting a new loan for the other 50%, this is a loan that should be very, very easy for the buyer to obtain…which would mean this is just one less thing a seller has to worry about.

However, if the buyer was only putting 5% down, and getting a new loan for 95%, then this loan is more difficult to obtain, and there are more things that could go wrong. It doesn’t mean that the loan won’t get approved and funded, but it is certainly trickier than the 50/50 loan above.

Or…if the buyer has stated they will purchase “all cash”, and then decides to get a loan, this is a very big change…and a very big deal. Or perhaps they buyer said they would be getting a conventional loan, and now wants to get an FHA loan…again, another big change.

So…in the situation where a buyer chooses to change financing options during the escrow period, (for whatever reason), the buyer can do this, but the buyer is still obligated to close the escrow on time…and if the buyer cannot do this, then there could be financial consequences for the buyer.

In the standard Purchase Contract, the actual wording is as follows:

“Seller has no obligation to cooperate with the buyers efforts to obtain any financing other than that specified in the Agreement, and the availability of any such alternate financing does not excuse the buyer from the obligation to purchase the property and close escrow as specified in the agreement.”

This clause is there to keep buyers from saying one thing to get their offer accepted, and then doing another.

The bottom line here is that all these financing issues need to be addressed by the buyer PRIOR to the offer to purchase, so that when the offer is written, everyone has done their homework and is on the same page. As the saying goes…”changing horses in mid-stream” is not a good idea.

Take care, and as always, thanks for reading our blog.

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