Deborah Madey - New Jersey

Hi,

Thanks so much for returning to the forum and providing updates.

From your description, it sounds like the buyers were not seeking an "out" and really were denied their loan. They, like you, are subject to the bank's approval process. A loan officer issues an initial prequal or preapproval. After a loan is completely packaged, it is sent to a processor, and then to an underwriter. There are several levels of interim steps internally with a lender prior to the final "clear to close" is given. Until there is a "clear to close" given, there is always a possibility of denial. What were the conditions listed on the commitment? Have you seen a copy of the commitment?

It's true that a buyer can, at times, use the mortgage contingency as an escape to terminate a contract. Even when that happens, many sellers find their best solution is to return deposits, quickly return to the market and find a new buyer. Although that may seem unfair, it is often the best path. Litigation can be costly, delay a sale, and it can be difficult to prove that a buyer "could have" gotten their loan. Negotiated settlements are an alternative solution. The approach that is correct for a buyer or seller in a specific contract depends upon an evaluation of all of the facts and actual decisions should only be made with the advice of legal counsel.

It seems, though, that with your buyers, legitimately want to purchase. Perhaps they are also surprised, disappointed and inconvenienced. Perhaps they, too, arranged movers, made arrangements to vacate their current residence, etc. I do realize that your expense, inconvenience and uncertainties are your priority.

During the early and mid-2000's, financing was easy, but the scrutiny of the loan packages as it progresses through levels of approval have substantially icreased. I have witnessed strong buyers, with 750 credit scores and 20% down, stable work records, strong cash reserves, and preapprovals find that they were denied at a very late stage...through no fault of theirs. I have seen buyers in this circumstance be very surprised, even insulted or angry over it. It's a reality of the loan underwriting process today.

Look at the commitment, and discuss the "conditions" with your attorney and agent. Your attorney and agent are the best sources of advice on reading the intent of the buyer. They will rely upon the written documents, and the communicaitons from the buyer's agent and buyer's attorney. That will still not provide you guarantees, so I will wish you an added ounce of luck. I hope your buyers are successful with their new lender.

Deborah Madey - Broker
Peninsula Realty Group - New Jersey
732 530-6350 - Wed Oct 21 2009, 04:44