Once a seller accepts an offer, the buyer is officially in contract to purchase the house. The loan process begins.

What if the buyer decides to change the financing specified in the contract? For example, instead of the original 20% down payment, the buyer intends to only put 10% down, so that his cash can freed up for improvements he is planning for the property.

Is this a violation of the terms of the contract? Is buyer in breach, and therefore, is this ground for termination of the contract, and can the seller keep buyer’s deposit?

The answer is No. Although the seller may have considered the loan terms, including the amount of down payment, in his decision to accept the buyer’s offer, buyer may still seek other types of financing to complete his purchase.

The C.A.R. contract is very clear on how to address any change in buyer’s stated financing. While the buyer may obtain financing different from what is in the contract, Section 3-K states that buyer’s failure to secure such alternate financing does not excuse him from his obligation to purchase the property. Buyer has to pursue the financing type specified in the contract, and if unable to secure said loan, then and only then can the buyer be released from the contract (assuming the loan contingency has not yet been removed).

It is best to be informed!