The purchase agreement has been signed before the notary—and then the buyer gets in touch with the news that their bank will not disburse the loan after all. For sellers, this is a moment of shock, but no reason to panic: Contrary to what many believe, a buyer cannot simply withdraw from a notarized agreement just because their financing falls through. We explain what rights you have as a seller, how you can recover your losses, and how to keep the risk small from the outset.
Before or after the notarization appointment—the difference that decides
Whether failed financing becomes a problem for you depends primarily on the timing.
If the loan fails before the notarization, you are still legally free. Until the signature before the notary, neither party is bound—an oral promise or a handshake obliges no one, because a real estate purchase agreement must be notarized (Section 311b BGB). In this case, you mainly lose time and turn to the next interested party.
If the financing falls through after the notarization, the situation is different: The purchase agreement is effective, and the buyer’s obligation to pay the purchase price remains in force. The fact that their bank does not cooperate is generally their problem, not yours. A buyer has no statutory right to withdraw from the agreement solely because their financing has fallen through. They bear this risk—unless the agreement provides otherwise.
The financing contingency: the decisive clause
This exact “something else” is the financing contingency. It gives the buyer the right to withdraw from the agreement if they can demonstrably not obtain the financing. In Germany, such a clause in a notarized purchase agreement is more the exception—unlike in some other countries, where it is standard practice.
For you as the seller, the financing contingency is the biggest contractual loophole. If it has been agreed, you should ensure tight, precise wording:
- a short period during which the contingency applies (for example, four to six weeks after notarization),
- a clear obligation to provide evidence (written rejections from several banks rather than a mere assertion),
- an indication of the amount of financing required.
Important: Verbal side agreements relating to the purchase agreement are invalid for real estate transactions. Everything intended to apply must be notarized as well. If no financing reservation was included, the buyer remains fully bound by the contract, even if their bank pulls out.
Sellers have these three options
If the buyer does not pay the purchase price, you generally have three options.
1. Uphold the contract and enforce payment of the purchase price
You can hold the buyer to the contract and insist on payment. A clause found in almost every notarized purchase agreement pays off here: submission to immediate enforcement (§ 794 para. 1 no. 5 ZPO). This means you do not first have to sue for the purchase price in lengthy proceedings—the notarized deed is already an enforceable title. You can therefore initiate enforcement proceedings directly. In addition, the buyer owes you default interest from the time of default (more on this below).
2. Withdraw from the contract
If the buyer does not pay despite the payment being due, you can withdraw from the contract. As a rule, this requires that you have previously unsuccessfully set them a reasonable deadline for payment (§ 323 BGB). This grace period gives the buyer one last opportunity to get the financing arranged after all. Setting a deadline is only unnecessary if the buyer seriously and definitively refuses to pay.
After withdrawing, you must unwind the contract. The catch: An priority notice of conveyance is usually already registered in the land register in favor of the buyer. As long as it remains there, you cannot freely dispose of the property or transfer it to a new buyer. To have it deleted, you need the buyer’s consent. If they refuse, you may have to enforce it in court. Allow time for this.
3. Cancel the contract by mutual agreement
Often, the quickest route is cancellation by mutual agreement. In a cancellation agreement—which must again be notarized—both parties unwind the purchase and simultaneously arrange for deletion of the priority notice. You can agree on compensation or a contractual penalty to cover your costs and the inconvenience. For a buyer who is insolvent, this is often more attractive than enforcement proceedings—and you regain the freedom to dispose of your property more quickly.
What damages can sellers claim?
A Withdrawal does not exclude damages – you can claim both. If the buyer fails to meet their payment obligation, you are entitled to compensation for the damage incurred as a result. Typical items include:
- Default interest from the time the buyer falls into default. For a private buyer, the statutory rate is five percentage points above the base rate (§ 288 German Civil Code). The base rate is 1.27 percent at the beginning of 2026 (Deutsche Bundesbank) – amounting to around 6.3 percent default interest per year.
- Lost profit if you can subsequently resell the property only at a lower price.
- Costs of interim or duplicate financing, if you have already entered into other commitments in reliance on the sale.
- Renewed marketing costs, as well as broker, notary and attorney fees.
In total, such claims can amount to significantly more than ten percent of the purchase price. Important: The burden of proof lies with you – document every loss carefully and keep all receipts.
Withdraw or uphold the contract? Advantages and disadvantages for sellers
Which route is right depends primarily on whether there is still anything to recover from the buyer.
- Upholding the contract – advantage: If the buyer is only temporarily short of funds or has assets, you can obtain your money through enforcement without having to sell the property again.
- Upholding the contract – disadvantage: In the event of genuine insolvency, enforcement is also worthless, and you remain tied to a buyer who cannot perform.
- Withdrawal – advantage: You are released from the contract and can market the property again.
- Withdrawal – disadvantage: The reversal of the transaction, including deletion of the priority notice, may take time; until then, your property is blocked.
- Mutual rescission – advantage: Fast, predictable and with agreed compensation.
- Mutual rescission – disadvantage: You depend on the buyer’s cooperation and must go to the notary again.
Seek legal advice at an early stage – the course is already set when the deadline is issued.
How to prevent the financing risk
The best way to prevent a failed loan is not to let things get that far in the first place:
- Binding financing commitment instead of "mere expression of intent: Before the notary appointment, do not merely ask to be shown a non-binding “feasibility confirmation,” but a specific loan commitment from the bank.
- Check creditworthiness and equity: Ask how much equity the buyer is contributing. The higher the share, the more stable the financing.
- Define the financing condition narrowly or omit it: Agree to it only if necessary, and then with a short deadline and clear obligation to provide evidence.
- Tie maturity to security interests: The purchase price should not become due until the usual requirements (such as registration of the priority notice of conveyance) have been met.
- Keep a prospective buyer in reserve: Maintain contact with other prospective buyers until the purchase price has actually reached your account.
FAQ on Failed Buyer Financing
Can a buyer withdraw from the contract if their financing falls through?
Generally, no. After notarization, the buyer is bound. Withdrawal solely because of failed financing is possible only if an effective financing condition was agreed in the contract. Without such a clause, the buyer bears the financing risk themselves.
Do I have to set the buyer a deadline before withdrawing?
As a rule, yes. If the buyer does not pay despite the payment becoming due, you generally must first grant them a reasonable grace period for payment. Only if this expires unsuccessfully can you withdraw. If the buyer expressly and finally refuses payment, the deadline is unnecessary.
How do I remove the priority notice of conveyance from the land register?
You need a cancellation consent from the buyer, which must be submitted to the land registry office. If the buyer grants it voluntarily – for example, as part of an amicable rescission – the process is quick. If they refuse to cooperate, you must enforce the cancellation consent through the courts.
What default interest can I claim?
Against a private buyer, the statutory default interest is five percentage points above the base interest rate. With a base interest rate of 1.27 percent at the beginning of 2026, this amounts to around 6.3 percent per year on the outstanding purchase price – from the time the buyer is in default.
What if the financing fails before the notary appointment?
Then you are in the clear: Before notarization, there is no binding contract yet. Although you lose time, you can without legalTurn to the next prospective buyer. That is precisely why it is worthwhile to thoroughly check the buyer’s financing before the notary appointment.
Conclusion: Keep calm and take the right steps
A buyer’s financing falling through is frustrating, but it is usually manageable for sellers. After notarization, you hold the stronger position: The buyer remains obligated to pay, and you can hold them to the contract, withdraw, or mutually agree to terminate the contract – supplemented by default interest and damages. However, the most effective protection comes beforehand: a binding financing commitment before the notary appointment, a narrowly defined financing contingency, and another prospective buyer in reserve.