Five Disadvantages of a Lender-Financed Proposition

Not every offer is made equal.

It is vital to be smart about selecting the appropriate offer, not just the most expensive. The optimal offer completes the agreement and enables you to go on. At the eleventh hour, the incorrect request encounters an unanticipated issue, forcing the transaction to collapse, reverting you to square one. We’ll discuss the primary conditions that lender-financed bids usually include, as well as the primary disadvantages of such offers, in this article.

When working with “financed” purchases, the most often encountered contingency is obtaining final mortgage clearance from the purchaser’s lender. Although the procedure has improved significantly over the past decade, there are still many hurdles to overcome before reaching the closing table. At first glance, a full-price offer with a 60-day mortgage contingency may seem appealing, but this is not always the case. Five disadvantages of a lender-financed bid are listed below:

Termination Period

Regardless of the buyer’s credentials, they must get a loan pre-approval letter before buying your property. There are many steps involved between loan application and closing, including appraisal, lender letter, application review, title search, homeowner’s insurance, condition review, and distribution of closing papers. A single hiccup in any of these checkpoints may delay many days, if not weeks, in the closure of the transaction.

While your financed buyer is going through this process, you remain liable for the property’s mortgage, taxes, insurance, and utilities until the deed is transferred. These are often unexpected expenses that deplete your financial reserves for the move to your new house.

Financing Obstacles

We touched slightly on this in the previous section, but successfully finishing a loan may be a significant challenge. Lenders are still reeling from the mortgage crisis and want to work with only the most reputable candidates. Each item on the loan application is reviewed and assessed carefully. A lender requesting inspection, documentation, and verification of withdrawals or deposits on a bank statement is very common. When you believe you are done and safe, an inspector may return to request further documents, prolonging the process.

Lenders are no longer leaving any documentation in the loan file. No loan application is easy, regardless of credit score, down payment, lender letter, or pre-approval letter and among other things. There are too many bad stories of loans being rejected weeks into the process due to appraisal, title, or tax return problems. Each lender-financed transaction entails some element of this risk.


After a loan offer is accepted, a home inspection is a typical first step. Buyers want to know exactly what they’re getting into when it comes to the physical condition of their prospective home; a home inspection offers an in-depth examination of a property’s condition. The majority of inspectors are very knowledgeable in their fields and provide excellent service to their clients. They often find dents and damage to the property that was previously unknown to the seller.

If these features come at a high price, the buyer may become suspicious and feel that they overpaid for the property. Buyers may use these findings to justify financing, and depending on the extent of the necessary repairs, some lenders may delay approval until the repairs are completed. In any event, a negative inspection report exposes the seller to the following risks of wasting significant time and money on repairs.

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Repair and Credit Requests

Negative examinations may result in a variety of problems. As previously stated, the first is a potential price reduction. This is much more painful if you were ignorant of the issue and did not budget for it properly. The second situation arises when a buyer demands repairs before COE. As the seller, you must choose a contractor competent in completing the work, one capable of doing it on your timetable. Not all respectable contractors are willing to adjust their schedule to accommodate a repair request within the transaction’s timeline.

Additionally, lenders may demand that inspection problems be resolved and re-examined before approval by the appraiser or inspector after your contractor completes the repair; you’ll need to arrange a follow-up visit from the appraiser and home inspector to document the work and get loan approval. Complying with a buyer’s and lender’s letter for repairs may provide a logistical challenge that may add days or weeks to the duration of a transaction.

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The Purchaser Discovers a More Beneficial Alternative

It is very uncommon for buyers to make concurrent offers on several properties in hot markets. They may “shop around” until one of their bids is accepted, and if several bids are received, they must select which property to pursue. This determination may take place days or even weeks after the property is put in escrow. However, if you sell to a buyer who cancels escrow in pursuit of a better bargain, you may be out of luck.

Choosing between a smaller cash offer with fewer contingencies, and more significant offers subject to mortgage approval is tough. As a seller, you must consider your financial situation, property goals, and property timeline. Simply put, every offer that includes a financing condition has some risk that you must evaluate.

Financial difficulties are the reason for canceled deals. Spare yourself the trouble of overthinking “how to sell my house fast” and collaborate with a cash-paying buyer. Get a Cash Offer Today!

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