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The seller should pocket your $20k and put it back on the market and sell it for slightly less because house buying season is ending and the long list time will encourage lower offers. They'd be better off not offering to let you buy it for $5k more. They probaly want the $5k to justify why they would turn down a free $20k.
Location: In a little house on the prairie - literally
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Quote:
Originally Posted by joker1979
We had a date of August 26th in the contract to close. We would have closed by that date; however, my wife lost her job around that time and as a result our lender would not allow us to close on the house until we sold the condo which we just close don this week. We didnt default on purpose - it was due to wife losing job and as a result lender putting a contingency on our loan. And we are ready to close now.. only 1 month later. It just does not seem fair. Im not sure what costs they incurred in that one month - they have not lived in that house for 2 years and its paid off but I know they were renting it until end of summer. We had to incur many costs and headaches as well (our child could not start school on time and we are renting now to keep her in the school district where the house is while at same time paying for condo mortgage and dues).
Your problems are not the seller's problems. You agreed that you would close in August. You didn't. The reason is irrelevant. If I was the seller, I would keep the 20K. Why?
Because what if I have to hang on to the house and the market changes? What if I incur repairs that might be needed now? What if and what if?
It's not personal, it's just business. Your best bet is to try and negotiate with the seller, and close on the deal. Absent that, kiss the 20K good bye. That's life in the big city, in the suburbs and even out in the sticks.
Our contract does state that if we cannot get a mortgage, we do not have to close and can walk away. Since the lender would not allow us to close on house until we close on our condo, wouldnt that excuse us?
Except that you agreed to close in August -- and here it is, almost October. You're lucky they have been this patient -- by not closing on the date specified in August, you were in default of the contract. In other words, you agreed to perform a closing on that date. You did not. You are non-performing and in default. They could easily keep the entire $20K, but it sound like they are being reasonable -- they want to be reimbursed for costs that they incurred through no fault of their own.
Most contracts around here have a deadline by which you have to obtain financing. After that deadline is past, you have lost the right to back out of the sale (simplifying a great deal, here.)
The lender presumably gave you a prequalification based on two incomes and not having the sell the house, which is what the seller relied upon when making the loan. Therefore, you are, again, non-performing. You changed the rules on the seller -- first, you didn't have to sell a house, and then you did. Personally, I would almost never go into a contract with someone with a house to sell that didn't have a contract already in place. I had a client who did that recently, and who was confident that their current home would sell (it will, it's a very hot area that typically has multiple offers, and they aren't greedy on the price.) However, the seller insisted on a non-refundable $4K as part of a $12K earnest money -- because they would be losing a month of marketing opportunity. My buyer is confident enough to agree to it -- knowing full well that if it comes down to the wire, he's losing $4K.
I too am not sure where everyone is coming from...The loan contingency clause here reads..
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C. THIS AGREEMENT IS CONTINGENT UPON BUYER QUALIFYING FOR A NEW LOAN ON THE FOLLOWING TERMS AND CONDITIONS: Conventional, FHA, VA, Other (specify) . Interest: Fixed rate, years -OR- Adjustable Rate, years. Initial rate of interest not to exceed %. Initial monthly payment not to exceed $ , not including taxes, insurance and/or PMI or MI
*****************************
That's ALL? Wow. Here, the loan contingency exhibits are 2 pages of 9 point type, and are VERY specific as to deadlines. Appraisal must be obtained by such-and-such date, and buyer and seller have X number of days to negotiate new price based on low appraisal. Total financing approval must be obtained within Y days (usually 21-25), and it must not be due to seller's culpability (i.e., failure to provide requested information, changing jobs, buying a new car, omitting significant credit information such as bankruptcies, foreclosures, etc.) There are separate exhibits for FHA, VA, Conventional, USDA, All Cash, etc.
There is also an entire page of an exhibit having to do with the sale of another house as a contingency of sale. Again, deadlines abound.
IF the buyer did not have the sale of the house as a contingency, and the loan was denied due to the house needing to be sold, then that was a risk the buyer took. The failure to sell the current house would be culpability on the part of the buyer.
Any circumstance where the bank declines to loan the money kills the deal. And the agreement is killed requiring the return of the Earnest Money.
I believe the OP stated they are approved for the loan just the mortgage company will not allow them to Close on the new home until they Close the sale of their condo. Does that create a decline or is it an approval with a "wait until"?
I believe the OP stated they are approved for the loan just the mortgage company will not allow them to Close on the new home until they Close the sale of their condo. Does that create a decline or is it an approval with a "wait until"?
The OP was approved for a Mortgage based on a dual income. When his wife lost her Job they no longer qualified for a loan (declined) but his saving grace was that he had his condo up for sale as well.
However selling his condo was not a contingency in the contract he signed with the seller hence the predicament he's in.
The lender probably told him if he sells his condo he would have enough money after the sale to qualify for a mortgage by himself & probably with more money down.
Not sure if the OP had a real estate agent representing him but the minute he was declined because of his wife's sudden unemployment, his agent would have tried to renegotiate the initial contract which would have changed the terms to include them selling their condo as a new contingency as well as extending the closing date.
The Seller could have declined those new terms & the OP would have had his earnest deposit back by now. The OP mentioned that there were Multiple offers on the Seller's house so they basically lost out on things like carrying costs for a month now as well as selling the house to another buyer who may have been able to close in the same time period.
Either try to negotiate the $5,000 they want and if they won't budge just pay it if they don't want to lose the entire $20,000 deposit.
^^ That was the buyer's REAL problem. The contract didn't have enough protections for him. But that's "water under the bridge now." Bet he'll have a more favorable or detailed contract the next time.
And it doesn't sound like the OP's agent was on the ball -- in his corner protecting him as much as s/he could have been.
As some have said, the OP is lucky the SELLER didn't say we're done with this and kept the deposit before now. So I think the seller has shown they want to get a deal done. But they also don't want the fact that they waited on the buyer -- to cost THEM money.
We had a date of August 26th in the contract to close. We would have closed by that date; however, my wife lost her job around that time and as a result our lender would not allow us to close on the house until we sold the condo which we just close don this week. We didnt default on purpose - it was due to wife losing job and as a result lender putting a contingency on our loan. And we are ready to close now.. only 1 month later. It just does not seem fair. Im not sure what costs they incurred in that one month - they have not lived in that house for 2 years and its paid off but I know they were renting it until end of summer. We had to incur many costs and headaches as well (our child could not start school on time and we are renting now to keep her in the school district where the house is while at same time paying for condo mortgage and dues).
Motivations don't matter; actions matter. Life isn't fair either. I'm sure your mother told you that. It's unfortunate that your wife lost her job, but the seller is losing money by your not closing on time. The lawyer gave you advice that you don't want to follow. You have the choice to A. hire another lawyer who will likely give you the same advice and pay him/her a lot of money for the privilege or B. listen to the first lawyer. I agree with everyone else who said that we can't give you legal advice. We can't, but from what I've read, you are in the wrong by being the cause of the late closing date. CAVEAT: My opinion is worth exactly the amount you paid for it.
I think there are a few lessons to be learned from this thread:
1. Get legal advice early on. When legal advice is warranted, it's better to get it early in the process. It's much cheaper and easier to avoid a problem than it is to try to fix a problem.
2. Consider hiring some help. Regardless of one's capabilities, it is oftentimes wise to hire some assistance. Whether that is an experienced real estate agent or an experienced real estate attorney, simply having another set of eyes and ears to review documents and/or keep track of the process can be beneficial. There is a lot going on in a real estate transaction and attention to detail is important.
3. Buyers shouldn't give Earnest Money Deposits directly to Sellers. Although practices may vary in different states, it's best to place your earnest money in the hands of a neutral third party. That way, when there are disputes, the Seller doesn't automatically have the upper hand. I prefer to place earnest money deposits with the title company selected to handle the closing--immediately after a contract is executed.
As to the OP's situation, they are in a tight spot. The Seller has a valid complaint since it has now been four months with no closing and additional costs have been incurred. The OP also has a potentially valid issue if a loan couldn't be secured in time. (Although we don't know what communications took place between the parties regarding the loan or contract extensions.) The OP could play hard ball and sue for specific performance, file a lis pendens, etc., etc., but from a practical standpoint it's best just to try to work out a settlement. Acknowledge the delays and offer to bump up the purchase price by $2,500; negotiate as best you can.
Since the Sellers wanted an answer yesterday, what happened?
We signed a contract to buy a house in late May and put a $20k deposit on it with the seller's attorney. There were no contingencies except for us getting a loan. The seller put a goal closing date of end of August into the contract. At the same time, we were selling our condo. In the process, my wife lost her job and so we changed the loan to just in my name but it then became contingent upon us selling the condo first before we could close on the house. The condo sale took a very long time due to buyers/condo association missing paperwork/etc. The sellers of the house we are buying became impatient and started legal action saying if we dont get a closing date soon they are moving forward to keep the deposit of $20k. Well we closed on our condo this week and are ready to close on the house anytime the sellers want but they now are saying they incurred losses and demand to keep $5k of the deposit. We don't want to agree to this and they aren't willing to budge. Our lawyer says they have already filed most paperwork to start legal action to keep the entire deposit if we dont close. He says we will more than likely lose the deposit and incur attorney fees of at least $5k. We have to give an answer today on whether they can keep the $5k of the deposit or we go to fight them.
I understand that the seller can only keep money if (1) buyer backs out (which we are not ding) or (2) buyer defaults (I dont see how we defaulted - would the fact that we were supposed to close in August but are ready only a month later (due to circumstances outside our control) be considered buyer default? Even though our lender put a contingency on our loan that we cant close on house until we sell our condo due to my wife's job loss in this entire process?)
If we choose to fight this, are we really likely to lose in this case? Is our lawyer essentially right?
I understand that they wont be able to sell the house while this is going on right?
You are right about everything. From reading your post I do not believe you could ever be wrong. Go you!
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