Members and their clients often confuse the Buyer Approval and Property Approval paragraphs in the Third Party Financing Addendum (TXR 1901). If a lender denies the buyer’s loan because of credit history, income, or assets, this falls under Paragraph 2A, Buyer Approval, and your client must terminate within the time required by the blank in that paragraph. However, if a lender will not finance the loan because of something related to the property itself, such as a low appraisal, insurability, or lender-required repairs, this falls under Paragraph 2B, Property Approval. The time period for terminating under this paragraph is no later than three days before closing, and the buyer has to deliver a copy of the letter from the lender stating why property approval has not been obtained.

Ryan Bauman, staff attorney