Q: Recently we entered into an agreement to purchase a house. We were going to do a loan based on the seller’s appraisal of the house, so that we could get 100% financing. When the real appraisal came in, it was $5,000.00 below what the sellers had said and now the lender says we cannot do the original loan and that we must show that we have an additional $8000.00 in the bank (which we do not). Consequently, we could not finalize the sale.
We decided to give the sellers our initial down payment money in good faith. However, they refused the money and have now started legal proceedings to sue us. Their reasoning is that we did not have a loan within the 30 days as the contract stipulated. My real estate broker has offered to pay our closing costs so that we can use our closing money to qualify for the loan. My question is can we be sued and should I take my chances in court or take my realtor’s offer?
Ilyce, I listen to you on WSB and this is a situation my parents (who live in Florida) are facing. Can they really be sued for having to back out of the deal because they could not secure financing. The lender has said they cannot qualify for the loan now that the appraisal came in below value. They are going to consult a real estate attorney but my question is do the sellers have a case?
A: They may have a case.
If your parents had a financing contingency in their contract, it would say, the buyers must qualify for such and such loan by such and such date. If they didn’t qualify, the contract would terminate. In fact, that’s what happened. The only appraisal that counts is the banks. I don’t know what you mean by the sellers’ “Appraised value” that doesn’t sound real to me. Anyway, the price came in lower and the property didn’t appraise out in value.
But if your parents didn’t have a financing contingency, then they could be sued to force the sale.
Your parents must IMMEDIATELY seek the advice of counsel. And, I know I don’t need to keep hammering the point home, but this is why people use real estate attorneys to close deals, and not brokers. Georgia residents are at a huge disadvantage by not having real estate attorneys as part of their deals.
I wish your parents good luck and hope they have better luck next time. 100 percent financing is expensive. Perhaps they should consider buying something less expensive so that they don’t stretch themselves so thin.