February 6th, 2017 at 4:38 pm
Question: Last week, you addressed a seller’s right to cancel after serving a Notice to Buyer to Perform (NBP). I am the buyer’s agent in that situation. The seller has served an NBP to remove the buyer’s loan contingency, but my buyer needs more time to get his loan approved. What should I do?
Answer: Go over your buyer’s options with your buyer, and let him decide how to proceed. Some buyers may love the house so much that they are willing to take certain risks to get it, whereas other buyers may not. Your buyer’s options are generally as follows:
- Remove loan contingency: If the buyer loves the house and feels confident about getting a loan, he can remove his loan contingency to prevent the seller from cancelling. If your buyer subsequently fails to perform because of the loan, the seller may be entitled to the buyer’s deposit as liquidated damages.
- Cancel the agreement: If the buyer doesn’t love the house or situation, he can cancel the agreement and get his deposit back. Always give your buyer this option to stop him from later blaming you for his situation.
- Do nothing: If the buyer does nothing, the seller may or may not cancel after 2 days.
- Ask for an extension: The buyer can ask for an extension or even offer the seller a credit or some other concession in exchange for extending the loan contingency period. After all, sellers may serve NBPs because they have a back-up buyer offering more money. If that’s the case, your buyer may want to sweeten the pot for the seller to keep his deal together.
- Other: The buyer may have other options depending on the circumstances.
-Thank you to Norman Kawaguchi (Pasadena Office) for suggesting this week’s legal tip.
Copyright© 2017 Berkshire Hathaway HomeServices California Properties (BHHSCP). All rights reserved. Any unauthorized reproduction or use of this material is strictly prohibited. This information is believed to be accurate as of February 6, 2017. It is not intended as a substitute for legal advice in individual situations, and is not intended to nor does it create a standard of care for real estate professionals.
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