Specialist · Member since 2022 · 4 posts · 2 votes
HI I signed a purchase agreement for a home in Eureka, CA at the end of September 2021 that clearly states in section D, (loans) " this loan shall be at a fixed rate not to exceed 3.5% ". Now today I received an email from the lender informing me that the interest rate has gone up to 4.75%. No warning. The contract states that close of escrow shall occur 45 days after acceptance. This never occurred. How long is this valid for ? The contract is between myself and a brokerage firm. Any advice or insight is greatly appreciated
Investor · Marin County California · Member since 2018 · 1k+ posts · 2k+ votes
4y
It's impossible to give you even an off-the-cuff lay - nonlegal - opinion without a review of the entire contract so I think we are all necessarily shooting in the dark here. However, this transaction was set to close in mid-November and it is now almost March of the next year! What5 happened in all of those intervening months? Nothing? If so, a case can be made that the contract lapsed and is no longer binding or in effect (and, accordingly, you may have a claim for your EMD). Do get legal advice based on a review of the entire agreement of the parties. Good luck.
Real Estate Broker · Nationwide · Member since 2022 · 9 posts · 7 votes
4y
Disclaimer: I am not an attorney nor am I giving legal advice - simply just speaking from experience.
Have you signed off on your contingencies? If not, there's a good chance you can still back out and get your money back if you wanted to get out of the deal. The rate doesn't have much meaning to the seller - they just want the deal closed so I wouldn't worry about that. If you have signed off your contingencies, your EMD is "hard" meaning you'll probably have a hard time having the seller allow it to be refunded to you. Both you and the seller have to sign off a mutual release/cancellation which will instruct the escrow company what to do with the deposit (Refund to you, split it between you and seller, release to seller, etc). Your contract is generally still valid unless a cancellation is mutually agreed upon. Consult with a real estate attorney if things get hairy.
I am familiar with this section of the Purchase Agreement but have not run into this exact scenario before. Are you representing yourself or do you have another brokerage representing you as the buyer? Is the sellers brokerage representing you as a duel agent? I ask this as a realtor/brokerage has access to a free legal advice hotline through the California Bureau of Real Estate. Strictly my opinion (not legal advice) is that this would fall under your loan contingency if you had or still have one in place. It would also come down to if you are still using the same loan product that you had originally made your offer with. The limit on interest rate would not be put in the purchase agreement if it wasn't enforceable. The seller had agreed to this term when they signed the purchase agreement. The close of escrow date and where you are in the transaction is irrelevant unless you have received a notice to perform from the seller.
Investor · Marin County California · Member since 2018 · 1k+ posts · 2k+ votes
4y
It's impossible to give you even an off-the-cuff lay - nonlegal - opinion without a review of the entire contract so I think we are all necessarily shooting in the dark here. However, this transaction was set to close in mid-November and it is now almost March of the next year! What5 happened in all of those intervening months? Nothing? If so, a case can be made that the contract lapsed and is no longer binding or in effect (and, accordingly, you may have a claim for your EMD). Do get legal advice based on a review of the entire agreement of the parties. Good luck.
Specialist · Member since 2022 · 4 posts · 2 votes
4y
I've been informed that the extent of validity of the purchase agreement has lapsed (45 days) and an addendum must be added to reflect the new interest rate. Its a very unique and unusual real estate deal with many delays and variables due to red tape. Thanks for all the knowledge sharing!