What requirements, if any, are there for a buyer to remove a “Subject to Sale” contingency. If the UAR Subject to Sale Contingency Addendum was used and no additional language added there are no additional requirements accept providing notice to the seller to remove a contingency. i.e. the seller CAN NOT require the buyer to provide Proof of Funds, updated Pre Approval letter, Desktop Underwriter’s approval etc., unless those terms were negotiated in conjunction or in advance of accepting the Subject to Sale contingency. Buyer and Seller of course could agree to such terms at any time, but the lack of that agreement allows the buyer to remove the contingency with no additional proof or requirement.
Keep this in mind when entering into a Subject to Sale contingency, especially if the seller wants to retain the option to market the property to procure other potentially better offers. Below is an article from Curtis Bullock on the matter:
Realtor® Legal Tip – Does the Buyer have to provide written proof from a lender indicating she can close if she agrees to remove the Subject to Sale contingency?
I had an interesting conversation with a great broker this morning about this topic. Here’s the scenario we talked about:
The Buyer makes an offer subject to the sale her current home. The seller counters with the “Time Clause” addendum. The property goes under contract. An offer later comes in from Buyer #2. Seller accepts it in “Back-up” position with the Back-Up addendum. The Seller notifies Buyer #1 that she must remove the subject to sale, due diligence and F&A contingencies (as noted in section 1.2 of the Time Clause Addendum). The Seller also asks the Buyer for written proof from Buyer’s lender that she can perform with the contingencies removed.
Question – is the Buyer obligated to provide written proof from a lender of her ability to close the transaction with the contingency removed?
Get out a copy of the Subject to Sale and Time Clause Addenda, review them both, and post your answers in the comments and I will update this later with my thoughts on this topic.
***Update – Here’s the answer – as many of you have said, the answer to the question is – No, unless you have put in additional language on an addendum that requires the buyer to provide some sort of specific evidence (i.e., letter from a lender) that they can close without having to sell their current home. Many of you do this. Several of you have suggested other ways you handle this type of situation which is all great. My point here is to make sure everyone knows how the contract and addenda are worded so you can work with those and add to them as you see fit depending on your circumstances.
*This type of legal question further reiterates to me how vital it is to have a knowledgeable Realtor® guiding the client through this type of transaction. The consequences of not getting it right are significant.