Buyer Withdrawal Because of Failure to Obtain Financing:
An area of dispute, as it relates to the return of earnest money, may involve a Buyer’s inability to obtain financing. In sum, Sellers may believe that the Buyer did not make “every reasonable effort to obtain credit approval” (as required by the TREC Third Party Financing Addendum) and, as a result, should not be entitled to return of earnest money even if timely notice is given. However, what constitutes “every reasonable effort” is most oftentimes a factual issue, as the addendum does not go into detail about what “every reasonable effort” means. Importantly, the TREC Third Party Financing Addendum contains a blank for a specific time during which the Buyer must notify the Seller of their inability to obtain financing (see paragraph 2(a)). If this notice is not given in time, the contingency is waived. So, the need to strictly comply with all deadlines in the addendum is imperative.