What Happens If the Buyer’s Financing Falls Through?
It depends on the financing contingency. Under Florida’s standard FR/BAR contract, if the buyer’s loan is denied and the buyer terminates in writing before the Loan Approval Period expires (typically 30 days), the deposit is refunded and the contract ends. If the deadline passes silently, the deal proceeds as if the buyer were paying cash — and the deposit is at risk.
The Financing Contingency Is the Buyer’s Safety Net
Most Miami residential deals are written on the FR/BAR contract — the form jointly approved by Florida Realtors and The Florida Bar. If the sale is not cash, Paragraph 8 makes the contract contingent on the buyer obtaining loan approval. Two deadlines matter: the buyer must apply for the financing described in the contract within 5 days after the effective date, and must use good faith, diligent effort to get approved before the Loan Approval Period ends — commonly 30 days from the effective date (FHA and VA loans are often given 45 because of extra processing).
The contingency only protects the loan the buyer actually described in the contract — loan type, rate terms, and amount. A buyer who switches loan programs mid-deal, changes jobs, or finances a new car during underwriting can lose approval and the contingency’s protection along with it.
The Three Ways the Loan Approval Deadline Can Play Out
1. The buyer terminates in time. If the buyer cannot get approval and delivers written notice of termination before the Loan Approval Period expires — and is not otherwise in default — the contract ends and the deposit is returned. This is the clean exit the contingency exists for.
2. The buyer waives or is approved. The buyer can notify the seller of loan approval, or simply proceed. From that point the financing risk shifts to the buyer: if the loan later collapses at the closing table, the buyer is in default and the seller can generally keep the deposit.
3. The buyer stays silent. This is the trap. If the Loan Approval Period ends and the buyer has said nothing, the contract treats the buyer as if financing were no longer a condition — the deal continues as a cash transaction. The seller then has 3 days to cancel and return the deposit; if the seller doesn’t, a buyer who cannot close will typically forfeit the deposit. Florida contracts say “time is of the essence,” and courts enforce these deadlines strictly.
The Appraisal Piece
Under the current FR/BAR form, loan approval also requires the lender to have received a satisfactory appraisal before the Loan Approval Period expires. A low appraisal that kills the loan inside the period is generally covered by the contingency; discovered after the period, it usually is not. Buyers should calendar the deadline and ask their lender for a written denial letter early — sellers are entitled to see that the failure was real and not buyer’s remorse.
What Sellers Can Do When Financing Fails
A seller who receives a timely termination notice must release the deposit — fighting it usually just delays relisting. But when a buyer misses deadlines or didn’t genuinely pursue the loan, the seller may have a claim to the deposit as liquidated damages. Because escrow agents will not release a disputed deposit without both parties’ agreement, these disagreements often move to mediation (which the FR/BAR contract requires before suit) and, if unresolved, to court.
Financing Failures in Miami-Dade County
Miami deals fail on financing more often than most markets: condo buildings can be ineligible for conventional loans over insurance, reserve, or litigation issues, and appraisal gaps are common in fast-moving neighborhoods. Deposit disputes for Miami properties end up in mediation or the Eleventh Judicial Circuit in Miami-Dade County. Arturo R. Alfonso P.A. has represented Miami buyers and sellers in English and Spanish for over 35 years — whether your loan was denied and you need out cleanly, or your buyer vanished at the deadline and you want the deposit, if you’ve been searching for a real estate attorney near me, we can review your contract and deadlines the same day.
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