Recent changes to the FR/BAR Contracts have revised the definition of “Loan Approval” in the financing contingency provision and what is now required to satisfy the Loan Approval definition.
Effectively, there are now two components of the definition of Loan Approval.
The first component of Loan Approval is not new, as a lender must agree to loan the buyer funds described in the contract.
However, the second component is new and now reflects that an appraisal (or alternative valuation) satisfactory to the lender must be received sufficient for the loan to be funded.
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This means that a lender’s loan approval conditioned on an appraisal/ valuation is not considered Loan Approval under the new definition.
The reason is that a satisfactory appraisal is part of Loan Approval and not something to be satisfied later.
It should also be noted in the revised Loan Approval language that a lender’s loan approval requiring the buyer to sell a property is not Loan Approval, unless Rider V (Sale of Buyer’s Property) is attached to the contract.
The key here is that Rider V (Sale of Buyer’s Property) makes clear the buyer’s offer is conditioned upon the sale of the buyer’s property.
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