Despite financial contingencies, this home buyer may lose their $40,000 good faith deposit due to issues with the builder’s mortgage lender. Can they stop this from happening?

Q: I came to your website after reading an article that relates to a problem that I am facing in Florida right now.

I signed a sales agreement with a homebuilder in Orlando back in 2017. My loan was pre-approved with a mortgage broker, but during the home buying process, my realtor decided to switch to a local mortgage lender that I have found out is the builder’s preferred lender for its buyers.

For over six months they dragged out the application. The loan was approved only after I requested a final answer and before the builder defaulted me under the contract. I received the approval with one condition: To wire the money for the closing and obtain a letter of explanation with the change of circumstances from my mother. I work in the Middle East and my mom lives in the U.S.

We completed the wire transfer and once the funds were confirmed by the loan officer, he proposed a closing date. I traveled to the U.S. and once there, the lender denied our loan application without any further explanation.

I tried to get additional documentation to the lender and did get them the additional proof of funds and that we had sufficient savings. I even increased the amount of downpayment we would be willing to put down on the home. But, the lender accused me of making false statements and blamed me for the denial of the loan.

I applied with a second lender but I don’t qualify for the loan because my primary home is rented and I live abroad so I can’t apply for a portfolio loan. I was about to start the process to find a third lender, but the builder only wants me to work with its lender, the one that had denied me the loan without explanation.

The realtor is harassing me and has accused me of being the one who failed to comply with the lender when I have every single email, voice message and text messages proving that I worked diligently with the lender and even traveling to US in following their directions. I’m about to lose over $40,000.

The Realtor is threatening me with the loss of my entire good faith deposit if I don’t continue with the sale, but I am under the financial contingency of the contract and I have to terminate the contract based on this reason.

On the other hand, my mother is requesting that the title company refund the funds that were wired to them. I had emailed the realtor and requested that he stop sending messages to the the lender because our relationship ended with the notice of action.

What is your suggestion under my situation? Under the contract there is a financial contingency paragraph that protects me for this.

A: It seems to us that you don’t have an advocate on your side. This might be the time to engage the services of a real estate attorney or litigation attorney to figure out what’s going on.

While we appreciate that your contract has a financing contingency provision, you still need to make sure that you follow the terms of the contingency closely and give notice as required under the contract. An attorney can help draft a strong letter that complies with those requirements.

Please be aware that just because a contract has a financing contingency doesn’t mean that the provision has not expired or something else has happened to change your rights to terminate under the contract. For example, a contract can state that the buyer has 60 days from the date of the contract to obtain a firm commitment for financing from a lender. If the buyer is unable to obtain that commitment, the buyer must notify the seller on or before the end of the 60th day following.

If a provision like that was built into the term of the contract you signed with your builder, the terms of the contingency would require you to notify the seller by the 60th day that you couldn’t get the financing. If you blow the date, you blow the contingency.

What does this mean for you? You must make sure you understand the terms of your contract, the dates and, in particular, what the financing contingency means in your specific circumstances. For all of this, you should talk to an attorney to make sure that your rights have not been violated and to protect your hard-earned earnest money. Good luck.