Imagine for a moment that you are working with a buyer. You find them a home. Buyer and seller agree on price and terms and go under contract. In this hypothetical your buyer also has to sell their current home, therefore you use the V. SALE OF BUYER’S PROPERTY addendum, which is the correct addendum to use. Your buyer inspects the property, timely applies for his or her loan, the property appraises and your buyer’s lender issues a Loan Approval which is delivered to the seller with one condition; that buyer sell their existing property. Buyer’s existing property is under contract with an ALL-CASH buyer and the inspection period on that contract has expired. The sale of buyer’s property is therefore, for the most part, a certainty. Movers have been scheduled. Everything is in order.

You then receive a letter from the seller’s attorney cancelling the current transaction and citing the buyer’s failure to provide a Loan Approval within the Loan Approval Period. You do some diligence and what appears to have occurred is that the seller received an ALL-CASH offer for $20,000.00 more than your current contract.

You are horrified. Your buyer’s plans are dashed. Can the seller do this? The answer is “yes”.

The above scenario is very real. Below is how this scenario may occur as well as a solution to prevent it from occurring:

Section 8(b)(i) of the contract reads: “Buyer shall make mortgage loan application for Financing within ___ (if left blank, then 5) days after Effective Date and use good faith and diligent effort to obtain approval of a loan meeting the Financing Terms (“Loan Approval”) and thereafter close this Contract.”

“Loan Approval which requires a condition related to the sale by Buyer of other property shall not be deemed Loan Approval for purposes of this subparagraph.” (Emphasis Added)

The underlined language above becomes problematic for a buyer who has obtained what they believe is “Loan Approval” (containing the condition requiring the sale of Buyer’s property) within the appropriate timeframe and has provided that “Loan Approval” or notice thereof to the Seller. What has been provided is not Loan Approval at all. The contract condition has not been satisfied. In that case, section 8(b)(v) of the contract states that “if Buyer fails to timely deliver either notice provided in Paragraph 8(b)(iii) or (iv), above, to Seller prior to the expiration of the Loan Approval Period, then Loan Approval shall be deemed waived, in which event this Contract will continue as if Loan Approval had been obtained, provided however, Seller may elect to terminate this Contract by delivering written notice to Buyer within 3 days after expiration of the Loan Approval Period.” (Emphasis Added)

Because what your buyer delivered to the seller does not qualify as Loan Approval, then, upon the expiration of the Loan Approval Period the Seller may elect to terminate the Contract.


Until such time as this scenario is rectified by the drafters of the FAR/BAR Contract, a simple solution is, when using the V. SALE OF BUYER’S PROPERTY addendum, add the following language to that rider: “If Paragraph 8(b) is checked in the Contract, the second sentence of Paragraph 8(b)(i) is deleted.” This insertion will allow the conditioned Loan Approval to meet the definition of Loan Approval. The condition requiring sale of buyer’s property remains unaffected pursuant to the addendum.