ChainYou've presented an offer to a seller stating your going to use conventional financing to buy your new home.  The seller accepts the offer and then SURPRISE you send over an notice stating your are changing to FHA financing.  Now what happens?

In Virginia our Regional Contract states "a purchaser may substitute alternative financing/and or an alternative lender for Specified Financing provided:

a) Purchaser is qualifed for alternative financing
b) There is no additional expense to the seller
c) The Settlement date is not delayed
d) If the Purchaser fails to settle except due to any default by the seller, the the Default provisions of the contract shall apply.

The owner agrees to and signs the request for the new financing.  The FHA appraiser arrives at the property and says oh by the way in order for you to be able to get financing on this house the owner needs to install a new roof.  The seller says NO per the contract there can be no additional expenses.   A new roof would not have been a condition of conventional financing, therefore you are potentially in violation of item "b".   Yikes.

Of course you can bet at this point reasonable heads may not prevail.  The buyer threatens, the seller threatens, lines are drawn in the sand.  Trust me it's not a pretty picture.  And this is just one scenario where changing financing might have some unexpected consequences for all of the parties involved. If you know from the beginning you want to use FHA or VA financing then be upfront about it.  Don't think your contract is going to be rejected because it isn't conventional financing.  In Northern Virginia the largest percentage of closings occuring right now are with FHA financing. 

What you don't want is to find yourself in a long protracted fight over who is in default of the contract and who is going to get to keep the earnest money deposit.  The unexpected chain reaction could be a very expensive lesson that you don't want to learn.

                No Hassle-No Pressure-Just Straight Talk About The Northern Virginia Real Estate Market

If you are interested in learning more about the Northern Virginia Real Estate market including Alexandria, Arlington, Fairfax and Prince William Counties give Cindy Jones and CJ Realty Group, Inc a call at 703-346-2213. 

Military Relocation Specialist serving military families relocating to and from the Pentagon, Fort Belvoir, Quantico MCB and all of the Military District of Washington installations. 

Check out www.varealestatetalk.com and www.cjrealtygroup.com for more information.
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11 Comments on Can Changing Your Financing Have An Unexpected Chain Reaction?

MAY
20
2011
477,449 Points 10 Featured Posts Outside Blog Attended Rain Camp Called Shot Master

So true Cindy. It only takes an experience or two like you share in this blog for a realtor to learn this. It is one of those values a buyer or seller receives when hiring a true professional.

Cal
8:08pm • #1
177,527 Points 59 Featured Posts Outside Blog

Great info Cindy! And I don't doubt one bit that agents and buyers have this financing change strategy planned from the start thinking that they are going to get sellers to pay for a bunch of repairs.
8:19pm • #2
1,099,877 Points 94 Featured Posts Outside Blog Hit Router Attended Rain Camp Called Shot Master

Cindy,

You're right. This scenario could get ugly very quickly. The resolution is very difficult.

Rich
9:54pm • #3
MAY
21
2011
1,527,141 Points 164 Featured Posts Localism Sponsor Outside Blog Attended Rain Camp Called Shot Master

Cal-I've had a couple of issues come up when a buyer on one of my listings changes financing from Conventional to FHA.  Now I'm always sure to ask for proof of funds of their 20% down payment to see if they have the money to start with.
6:30am • #4
1,527,141 Points 164 Featured Posts Localism Sponsor Outside Blog Attended Rain Camp Called Shot Master

Jeff-in one case I have been involved in I suspsect this was the case.  However it didn't pan out well for the buyer or their agent in the end.
6:31am • #5
1,527,141 Points 164 Featured Posts Localism Sponsor Outside Blog Attended Rain Camp Called Shot Master

Richard-when cooler heads can't prevail then it is up to the court to decide.  The $$$ to everyone is significant.
6:32am • #6
1,519,648 Points 112 Featured Posts Localism Sponsor Outside Blog Called Shot Master

Now there's something the Buyers didn't think about.  That's a doosie.

Featured in the group:  Bartender, Make it a Double.
11:08am • #7
1,527,141 Points 164 Featured Posts Localism Sponsor Outside Blog Attended Rain Camp Called Shot Master

Chris Ann-when an agent sends over a switch to FHA financing without the FHA addendum they have also opened the buyers up to other issues as well.  One is that the appraisal contingency is no longer in effect.  It seems simple but it isn't.
11:52am • #8
631,063 Points 7 Featured Posts Outside Blog Attended Rain Camp Called Shot Master

Cindy ..Good post for Bardender make it a double !

Hannah
12:24pm • #9
1,527,141 Points 164 Featured Posts Localism Sponsor Outside Blog Attended Rain Camp Called Shot Master

Hannah-buyers and their agents need to make sure they think seriously when they write a contract that if they are going to switch financing their could be negative consequences.
6:57pm • #10
MAY
24
2011
161,176 Points 5 Featured Posts

Sounds like such a simple change, but can wreak havoc.
8:45am • #11

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Cindy Jones-Northern Virginia Real Estate & Military Relocation Services

Woodbridge, VA

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