Understanding the Financing Contingency in Lee and Collier County Real Estate Contracts
- 4 hours ago
- 6 min read
Before we talk specifically about financing, let’s start with the foundation.
What Is a Contingency?
A contingency in a real estate contract is a condition that must be satisfied for the contract to remain in full force and effect and move onto closing. They are basically off-ramps where for specific contractual reasons a contract may be cancelled.
Think of it as a contractual “if.”
If a certain event happens (or does not happen), Then the contract either moves forward, or one party may have the right to terminate.
Contingencies are added to a standard contract by buyers and are built into contracts to manage risk. They create structured time periods for buyers to complete due diligence and for certain approvals to occur. The contingency is to protect the buyer, the deadline is to protect the seller.
It’s important to understand that every contingency in a real estate contract is negotiated as part of the initial offer. The length of the contingency period, the type of loan, and the structure of the deadline are all part of the overall risk discussion between buyer and seller. In our Southwest Florida market, particularly in Lee and Collier County, where a significant percentage of transactions are cash, financing contingencies can sometimes be viewed less favorably by sellers. That’s because a financing contingency typically ties up the property for approximately 30 days while the buyer works through the loan process, without a full commitment to close. For a seller, thirty days is a meaningful amount of time to wait before knowing with certainty whether the transaction will move forward, especially in a market where alternative cash offers may not carry that same uncertainty. The more contingencies in an offer, the more complex the offer is and the more risk there is to the seller and more "reasons" that the deal could fall apart. So, buyers need to think carefully about what contingencies they add onto the purchase contract.
Common contingencies include:
Inspection contingency
Financing contingency
Appraisal contingency (not exactly the same as a financing contingency)
Sale of buyer’s property contingency
Each contingency has a deadline. If the condition is not met - or properly waived -0 within that timeframe, the contract’s direction can change.
That is why deadlines matter so much.
What Is a Financing Contingency?
A financing contingency is a specific contractual condition that gives a buyer a defined period of time to secure loan approval.
If the buyer cannot obtain financing within the agreed timeframe - and they have complied with the terms of the contract - they may have the right to terminate the agreement and receive a return of their escrow deposit.
This protects buyers from being legally obligated to purchase a home if a lender ultimately denies their loan.
At the same time, it protects sellers by placing a clear deadline on that uncertainty.
It is also important to note that a buyer may choose to obtain financing for their purchase without including a financing contingency in the contract. In this structure, the buyer is still using a loan, but they are not retaining the contractual right to terminate if financing falls through. This can strengthen an offer in competitive situations, as it provides the seller with greater certainty. However, it also means the buyer is assuming more risk and must be fully confident in their lender, financial qualifications, and ability to close regardless of unexpected lending challenges.
How Financing Contingencies Work in Collier County (NABOR Contract)
In Collier County, many transactions use the NABOR (Naples Area Board of REALTORS®) contract.
Under the NABOR contract:
A specific financing contingency deadline is written into the agreement.
On or before that deadline, the buyer must sign and deliver a one-page Waiver of Financing Contingency.
If the buyer fails to deliver that signed waiver before the deadline expires, the seller may terminate the contract.
This is a key procedural difference. The contingency does not automatically disappear when the deadline passes. The buyer must actively waive it in writing. If they do not, the seller has the contractual right to cancel.
That written waiver formally removes the buyer’s ability to terminate based on financing.
How Financing Contingencies Work in Lee County (FAR/BAR Contract)
In Lee County, many transactions use the FAR/BAR (Florida Realtors/Florida Bar) contract.
Under the FAR/BAR contract:
A financing contingency deadline is written into the agreement.
Once that deadline passes, the buyer automatically loses the right to terminate for financing reasons.
No separate waiver document is required.
So in summary:
Collier County (NABOR) → Buyer must sign and deliver a written waiver before the deadline.
Lee County (FAR/BAR) → The contingency expires automatically once the deadline passes.
Both achieve the same result - removal of financing protection - but they handle it differently.
Specifying Loan Type, Amount, and Terms in the Contract
When submitting an offer that includes a financing contingency, the contract requires that the buyer specify the type of loan, the loan amount, and certain loan terms (such as fixed or adjustable rate). This is not just administrative detail, it defines the exact financing structure the contingency is tied to. If a buyer later attempts to cancel due to financing, the loan that is denied must materially match what was written in the contract. In other words, the buyer cannot apply for different financing terms than those agreed upon and then rely on that denial to exit the contract. If the financing sought does not align with the terms specified in the agreement, the buyer risks losing their earnest money deposit because the contractual contingency would not apply. Clear, accurate loan terms in the offer protect both parties and prevent disputes later in the transaction.
Why Is the Financing Deadline Commonly Around 30 Days?
In many financed transactions, the financing contingency deadline is set at approximately 30 days from the effective date of the contract.
This allows the lender time to complete major underwriting items such as:
Ordering and reviewing the appraisal
Reviewing condominium or HOA documents and budgets
Verifying income and employment
Reviewing bank statements and assets
Completing initial underwriting approval
By that stage, the lender should have a strong understanding of whether the loan is viable.
The contingency is typically removed after the majority of underwriting risk has been evaluated, but before final clear to close from the lender.
Why Do Buyers Waive Financing Before Final Clear to Close?
This is one of the most common questions.
Lenders rarely issue final “clear to close” weeks in advance. They continue verifying employment and monitoring bank activity almost right up until closing. Final approval often comes just days before funding.
If buyers were allowed to keep their financing contingency until final clear to close, they could potentially cancel just days before closing.
That creates significant risk for sellers.
The financing contingency deadline creates a buffer between:
The removal of financing protection, and
The closing date.
That buffer allows sellers time to prepare - schedule movers, coordinate their next purchase, arrange utilities, and finalize their plans - with confidence that the contract is firm.
What Waiving the Contingency Really Means
When a buyer waives the financing contingency:
They are comfortable proceeding without the contractual right to terminate for financing reasons.
They are accepting the risk of moving forward toward closing.
It does not mean funds have been disbursed.It does not mean clear to close has already been issued.It means the loan is far enough along that the buyer is confident in moving ahead.
Strong communication between buyer and lender before this deadline is critical.
Why Understanding This Matters
Financing contingencies affect:
Risk allocation between buyer and seller
Negotiating leverage
Offer strength in competitive markets
Timeline coordination
Closing certainty
Missing a financing deadline - especially in a NABOR contract where a written waiver is required - can change the direction of a transaction very quickly.
Understanding how contingencies work in both Lee and Collier County helps both buyers and sellers make informed, strategic decisions.
And in real estate contracts, clarity around timing is everything.hem = is one of the most important parts of managing a smooth real estate transaction.
If you are considering buying or selling a home in Naples and surrounding areas and you aren’t satisified with average services, you will want to contact Your Naples Real Estate Expert, Renee Hahn, to ensure you get the service, attention and outcomes you deserve.
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