I have a home listed for sale that I completed flipping. Beautiful home, great area and went under contract fast. I accepted and signed an offer so we have a legal purchase agreement. It has now been just over a month and we were set to close in 10 days. I was just notified that the seller can not get funding because he had a short sale in the past and the appropriate time frame has not passed. First, how did he get pre-approval, with out lying on the app. 2nd I am guessing he had to of known about this because when we were negotiating the price he wanted to close 90 days later. I said no and he agreed to close earlier. As I said we are 10 days from close and now the mortgage company tells us they can not give him a loan for about 3 months because of the prior short sale. After talking to my Realtor I said to cancel the contract and re-list the house. I was told that I can not re-list the house until the buyer agrees and signs the purchase cancellation agreement. WTF. If he does not sign or don't want to, why can't I re-list the house. He cant buy it and cant qualify for a loan, so why cant I relist. I am also asking to keep the earnest money because he had to of known about this prior to our purchase contract and lied about it on the app. He wanted an 3 months to close before so this is a further indication that he had to have known. There was no real reason given why he wanted more time just that they would like more time before they closed. What are my options so I can get my house re-listed? With asking to keep earnest money all he has to do is just not sign and I can not relist. I am guessing I am going to have to give him his money just to get my house relisted and even then why would he hurry up and sign it does not effect him in any way. The property is in the Minneapolis, MN metro area if that matters.
Thanks in advance
Give him his EM back when he signs the purchase cancellation agreement.
Two separate issues, at least as they are applied here.
1). Your purchase contract should have a drop dead date for the buyer to obtain financing. I am guessing this has passed, and your contract should address how the contract is then voided.....either automatically or with notice from you to that effect.
2) The EM. You have no claim to that at all, unless the buyer specifically removed the financing contingency, if the contract calls for that. The reason the buyer could not obtain financing is irrelevant....had a short sale he hid, financed a new truck last week, lost his job, etc. some contracts/brokers have the implication/opinion that a seller can not enter into another contract (therefore they can't even offer it for sale) if there is a deposit dispute. This is not generally true, but often misapplied. I as the seller, had a buyer back out at the closing table. I made a claim for the EM and Specifically waived any right of specific performance enforcement. The broker at first said he couldn't relist, but he was incorrect since it was limited to an escrow dispute, and I had to find past legal precedent before he would relist.
You have no claim to the EM, from what you've posted this far. Let it go.
This is another reason we Insist any buyer be preapproved by Our lender, even if they don't use them, since some preapproval s aren't worth the paper they're written on, and apparently the loan officer didn't pull their full credit or they would have seen this day one.
I agree with Wayne Brooks.
Also, pre qualification and pre approval letters are not worth the paper they are written on.
A pre qualification letter just means that the person has spoken to a lender and TOLD them his income and debts. There is no verification required.
A pre approval letter goes one step further. As a minimum it means someone pulled their credit report. It can also mean there was some income verification. You have to read the letter to see what was done.
In either case nothing guarantees they can get a loan. Anyone can sabotage the financing simply by having their credit report pulled at a furniture store or two.
Best policy is to have a good relationship with a good lender.
Another point, if the buyer still wants the house add a sudden death clause to the purchase contract and realist it. If you get an accepted offer good for you. The first contract dies (sudden death). If the buyer gets financing approved simply remove the sudden death clause and close the deal.
What do I need to add to my Purchase agreements so that is sort of thing can be prevented?
Or what do I need to add so I can keep the earnest money, in this situation(not that it would even cover my costs). I truly believe that he new of this all along and there was no way that this loan was going to close for months and they new it. That's why he asked for more time. I will now hold this property for 2 more months and will have to pay for it to be staged for an additional 2 months. This is going to cost me a lot more.
What do some of you use for your PA, and what could I do to help prevent this anything?
Ideas or suggestions?
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