Buyer requested underwriting to deny mortgage to cancel contract. (loan officer, escrow, real estate)

[sadsadseller]

Need help - I am selling a home that was under-contract. Buyers had inspection - requested repairs - we performed all repairs except for one and provided a counter offer to pay for the repair after closing. The time for response from the buyers expired with no request for extension, counter offer, rejection. 48 hours later the buyers requested a repair that was not mentioned in their inspection report. (a $22K repair!) Our response was no and that their contingency expired.

We sent termination and advised we were entitled to the earnest monies. 24 hours after that - we received a mortgage denial letter from their lender saying the house was "insufficient collateral". We do know that the house did appraise.

Our broker contacted lender and buyer had called lender asking him to deny the loan so they could get out of the contract and buy a different property. He told the lender the house was not built to code and therefore structurally unsound. The buyer had originally requested at time of inspection proof the house was built to code which was provided by county officials including every permit sign off. SO WHAT NOW - I have been searching forums and cant find information that will help fight for the earnest money.

I believe we are covered by the clause "buyer must make timely good faith efforts to apply for and obtain financing while refraining from contrary actions" as they called the loan officer and asked for a rejection.......HELP please.....

[captchaos145]

I am a Loan Officer so I may be able to help.

Do you have a Real Estate Agent that listed your home? What did he/she say about everything?

Sellers rarely call the mortgage company. That's very odd.

What is the Commitment date on the Sales Contract? Look at the contract. The buyer needs to get a Mortgage Commitment from the lender by this date. It's almost like a guarantee.

How much was the earnest money deposit (down payment?)

What was the diference between the sale price and appraised value?

[sadsadseller]

Yes we have an agent (I am also a former agent). She called the mortgage company with us to get the reason for denial.

And that's when the mortgage officer told us the buyer called him stating property was structurally unsound and not to code. The broker in charge sent the full inspection and county code documents to the loan officer because he said he had nothing in writing from the buyer to prove either way. He was just doing what they asked him to do by denying the loan so they could buy another property.

P&S has 30 days from time of closing to obtain financing.

Sale 385K Appraisal 410K - However, the buyers are claiming to mortgage company property is now after the appraisal structurally unsound with no grounds or inspection reports to back it up.

[AZ Manager]

For starters you need proof of the request of denial, good luck. Without proof all you have is the denial letter and reason they provided which means they are covered under the financing contingency in your contract. A 22k repair is pretty huge, like new roof huge, I wouldn't blame them for wanting out if there's something that major that needs to get taken care of. Are you sure the lender didn't request the repair? If the lender requested the repair and you denied their next step would be to tell the lender you said no and they won't pay for it so they need to deny lending.

[emm74]

I think you need to talk to an attorney. It's going to depend on the specifics of your contract and the laws in your state, but when you made a counter offer, the buyer was not obligated to accept that, and in some cases, that exchange would effectively end the contract. Then the buyer made the offer re: the 22K repair - which it appears that you have rejected, meaning once again, it's possible there is no enforceable contract in place. You need someone to review the matter and advise you.

[Pfhtex]

Originally Posted by AZ Manager

For starters you need proof of the request of denial, good luck. Without proof all you have is the denial letter and reason they provided which means they are covered under the financing contingency in your contract. A 22k repair is pretty huge, like new roof huge, I wouldn't blame them for wanting out if there's something that major that needs to get taken care of. Are you sure the lender didn't request the repair? If the lender requested the repair and you denied their next step would be to tell the lender you said no and they won't pay for it so they need to deny lending.

This is excellent analysis.

[Merjolie8]

The way I read it is: Buyer requested repairs, seller made all repairs but one that they would give money for in closing. After all that, buyer came back requesting the $22K repair out of the blue and seller, understandably, rejected it. Then the buyer called their lender and requested their loan be rejected (under false pretenses) and the loan officer complied.

IMHO, the buyers found another property and were looking for ways to get out of the contract. Since the preposterous repair didn't work, they resorted to the lender rejection. OP needs to consult a lawyer, but if the contingencies had expired, the buyers would be contractually obligated to buy the property. I'd think you can sue them, but would it be worth it?

[AZ Manager]

Originally Posted by Merjolie8

The way I read it is: Buyer requested repairs, seller made all repairs but one that they would give money for in closing. After all that, buyer came back requesting the $22K repair out of the blue and seller, understandably, rejected it. Then the buyer called their lender and requested their loan be rejected (under false pretenses) and the loan officer complied.

IMHO, the buyers found another property and were looking for ways to get out of the contract. Since the preposterous repair didn't work, they resorted to the lender rejection. OP needs to consult a lawyer, but if the contingencies had expired, the buyers would be contractually obligated to buy the property. I'd think you can sue them, but would it be worth it?

You can't Sue someone to buy your house, or sell it for that matter. In thie case of a buyer they can walk the day before closing and all they would have lost is earnest money. As a seller your risk of not closing is much larger though, like if a buyer sold their house and now has to rent a place until they find a new one. A court will issue a buyer a judgement for rental costs, within reason, against a seller that backs out at the last minute. No court will ever force someone to buy or sell a home no matter the contract though.

[jackmichigan]

Originally Posted by AZ Manager

You can't Sue someone to buy your house, or sell it for that matter. In thie case of a buyer they can walk the day before closing and all they would have lost is earnest money. As a seller your risk of not closing is much larger though, like if a buyer sold their house and now has to rent a place until they find a new one. A court will issue a buyer a judgement for rental costs, within reason, against a seller that backs out at the last minute. No court will ever force someone to buy or sell a home no matter the contract though.

That is incorrect. Lots of Buyers have successfully sued Sellers for specific performance. I'm sure that it is very rare the other way around, though.

[sadsadseller]

To clarify - the $22K repair was to REMOVE AND REPLACE all fiber cement siding because the buyers believed it was not to building code. Which the county and city confirmed it was to code. This was not identified in the inspection report nor noted in any documents on their ORIGINAL repair request that we completed all but 1 repair ($300). We offered them the $300 at closing. They did not have any contact with us until AFTER their period for rejection had expired.

I don't want to force performance on the contract - we believe we are entitled to the escrow money. But it seems futile to sue for $3K if I have to spend $5K to get it.

I just want the mortgage company and other broker to be accountable for the entire mess....