Sellers threatening to sue me because I cant get financing

5 Replies

HELP! I own a house in San Diego which currently is not being rented out right now because the property manager is preparing the house for rental.

I went ahead and made an offer on a 2nd house. I obtained a preapproval letter from a mortgage broker based on my income. My income was enough to pay for both mortgages at the same time.

Last week the mortgage company said that because I had so many deductions on my 2004 taxes, I will need proof that the house is currently being rented in order to obtain the loan. I cannot get proof of a lease yet because the house is not ready for rental. As a result, they refused to give me a loan.

The contract for the second house was contingent on me obtaining financing. The sellers agent was pissed that I was not able to obtain the loan and threatened to sue based on the fact that I knew all along my San Diego house was not being rented out. I NEVER tried hiding the fact that the San Diego house was currently not being rented out and I do not think my preapproval loan application ever asked me how much the San Diego house was being rented out for in the past, it only asked for my salary at my current job.

I do not think he has a case because I dont think I ever included my rental income as my regular income in my preapproval letter. This only became an issue with the mortgage lender after they saw I took a lot of deductions in my 2004 taxes.

Does the sellers agent or sellers have a case against me?

I'd go straight to my lawyer and talk to them on this one. Hate to hear about that situation. Those mortgage guys can really screw things up sometime, can't they. Good luck. I hope it all works out.

yes the contract said that the sale of the house was contingent on me obtaining 80% financing at a rate of no more than 6.5%. I have a signed letter from my mortgage broker stating that the loan was denied because of "insufficient income". I faxed this to him 4 hours before the deadline.

The sellers agents argument is that I tried hiding the fact that my San Diego house is not being rented out which is absolutely untrue. Both my realtor and my mortgage broker knew the situation with my san diego house.

Legally am I okay?

20% down and you cant obtain a loan? Seems wierd to me. Have a list of lenders that will give you 100% Non owner occupied as long as you qualify with a Great FICO score. I am not getting the full story here and would like to speak to you in person in regards to this loan. Please call me or email me [email protected] When does escrow close. Have some lenders that will close in less than a week. So lets get on it.
:superman:

I don't think that the seller's agent has a leg to stand on....although you may have been approved based on your w-2 income, if you were using any rental income to qualify for the loan, then your 1040's will come into the equation, and if you have a lot of deductions, then that will reduce your income and may have been enough to kick you out of the parameters of the loan guidelines. This is always an unknown until your mortgage loan officer has all of your income documentation, although, if he/she was using any rental income to qualify you, they should've known that they would need the 1040's to verify income. You should most certainly still be able to obtain a mortgage for the property though, you could go with a stated income loan, no doc loan, no ratio loan, lite doc, or go through a "non-prime" mortgage provider. I will advise you that the rate will be a little higher on these types of loans, but if you really want the property, you should still have the means to do it. I don't believe that you were trying to mislead anyone about your intentions or ability to get a mortgage. Tell the sellers agent to extend the contract and get off of your back while you adjust your plan. Good luck!!!

David Spencer
Mortgage Consultant
570-412-4438

Sounds like the listing agent is trying to scare you. Shame on him/her. As long as you had a third party financing condition addendum and followed what it said they can't do anything to you.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Join the Largest Real Estate Investing Community

Basic membership is free, forever.