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Term sheet pulled

The lender pulled the term sheet

You had a signed term sheet and a closing date, and now the lender has withdrawn, repriced, or simply gone quiet. It feels like bad faith. Usually it is a condition that did not get satisfied, a credit committee that saw something the account manager did not, or a shift in that lender's appetite that has nothing to do with you.

Halftone illustration of a document with a broken wax seal.

A term sheet is not a commitment

There is a ladder here that is worth understanding. A term sheet sets out proposed terms and is almost always subject to a satisfactory appraisal, an environmental report, credit approval and legal review.

A commitment letter comes after those conditions clear. Funding comes after the lawyers. Each step can still fall over, and the earlier ones fall over often.

The reasons this normally happens

The appraisal or the environmental report came back differently from what was assumed. The income did not verify to the level presented. Something surfaced in credit or in the corporate structure.

Or the asset class went off appetite while the file was in process, or the lender's own cost of funds moved and the pricing no longer works for them. None of the last two have anything to do with your building.

What to do in the first two days

Get the reason in writing. The reason determines whether this is a file problem or a lender problem. A file problem follows you to the next lender and has to be fixed. A lender problem does not.

Tell the vendor early rather than late, and ask about extending subjects or the closing date while you still have goodwill. Then start a parallel process rather than waiting for the first lender to reconsider. Where the date is tight, the fast commercial mortgage page explains what speed costs.

How to avoid being here again

Run more than one lender on anything time sensitive. Disclose the awkward parts of the file at the start rather than hoping they do not come up, which is the same lesson as reading a decline properly.

And understand that a rate hold is a pricing hold. It is not a promise of funding.

FAQ

Questions after a lender walks away.

Generally yes. Term sheets are conditional documents and the conditions usually include credit approval, a satisfactory appraisal and satisfactory due diligence. What you signed was an agreement to proceed on proposed terms, not a binding promise to lend.

It depends on what the document says. Some fees are refundable if the lender withdraws, some are applied to third party costs the lender has already paid for, such as the appraisal and legal work. Read the fee clause before you assume either way.

Sometimes. A bridge or short term loan can close much faster than a conventional one and be refinanced afterwards, which costs more but preserves the purchase. Whether it is worth it depends on the size of your deposit and what you lose if the deal collapses.

That is a question for your lawyer and not for a mortgage broker. Commercially, most people find that arranging replacement financing matters more than being right about the old term sheet.

It depends on the property, the reason the first lender left, and how complete your file already is. A file with a current appraisal and clean financials moves considerably faster than one starting from nothing.
Keep reading

Related situations

You need to close faster than the bank movesBridge funding, expedited files and what speed costs.Your bank said noReading the decline and rebuilding the submission.How long this takesA stage by stage timeline and the usual bottlenecks.Have a broker read your dealSend the property and the numbers and get a straight answer. No fee, no credit check.

Do not wait for them to reconsider.

Send us the file and the reason it fell over, and we will tell you what is realistically available and how fast.

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