We were supposed to close last Friday. Buyer had an SBA loan lined up, everything seemed fine. Then two days before closing, the bank pulled the offer because of something in the buyer's financials. Now we're in limbo. Buyer says they can still make it work with a different lender, but that's another 60-90 days. We already told our employees, signed a lease on a new place, and turned down another offer. What actually happens now? Do we keep the earnest money? Can we sue? Should we just walk? This is a nightmare.
Deal Collapse
What happens when a buyer's main financing option falls through last minute?
Read your purchase agreement carefully. Most have a financing contingency. If the buyer can't get financing, they can usually walk and get their earnest money back unless the contract says otherwise. But if they're trying to keep the deal alive with a new lender, you may be able to hold them to the timeline in the contract. If they miss that, you might have a claim.
SBA loans fall through more often than people think. The bank's credit committee can kill it even after a conditional approval. Not much you can do about that except wait if the buyer is credible.
Seller financing. That's your answer if you want to keep this deal. Buyer probably can't get a traditional loan quickly enough. Offer to carry a note for 12-24 months with a balloon. You get your money eventually, and they get the business. Just make sure you have a sollid personal guarantee and a firts lien on the assets.
Did you have a backup offer? You said you turned one down. That's tough. If the earnest money is substantial, the buyer might be motivated to make it work. How much was it?
Also, check if the contract has a 'specific performance' clause. That could force the buyer to close even without the loan, but it's hard to enforce. Most sellers just keep the earnest money and move on
I went through this exact thing two years ago. Buyer's loan fell through at the last minute. We gave them 30 days to find another lender. They couldn't, so we kept the $50k earnest money and relisted. Found a new buyer in three months. The worst part was telling the employees. But you have to protect yourself.
If you keep the earnest money, Make sure it's actually in escrow and that the contract allows it. Some states require you to prove damages. Don't just assume you get to keep it.
How long was the original financing contingency? If it expired, the buyer might be in breach. You could send a notice to perform. That usually lights a fire.
Also consider the buyer's deposit. If it's non-refundable after a certain date, you might be entitled to it. But litigation is expensive. Sometimes it's better to just move on and keep the deposit if it's not too big.
One more thing. If yoou already announced to employees and signed a new lease, you might have a claim for reliance damages if the buyer breached the contract. But that's a legal question. Talk to your attorney. I'm not one.
This is why you always have a backup plan. Sorry you're dealing with it. Hope it works out.
Any update? Did the buyer come back with another lender?