Question Details

BT, Home Buyer in Seattle, WA

Had to waive the financing contingency in order to extend the closing date for one week - am I totally screwed?

Asked by BT, Seattle, WA Thu Nov 8, 2012

I’m a 1st time home buyer currently under contract that was supposed to close today. Sadly my financing took a bit longer and though I don't have “final approval” from lender at this point, both my loan officer&agent “guarantee” that there's no way it won’t come through given my borrowing profile. The seller at first wanted a release of earnest$ high amount of per diem charges when proposed 1week of extension. After hours of negotiation, it looked like the only hope for saving the deal before the seller walked was that I waive financing contingency. So I did and I'd been feeling really nervous, given that my earnest$ is 10%of sale price and several people said afterwards it wasn’t the smartest choice. My loan officer&agent reassure me that it’s common practice, but I wonder WHAT IF within the next week it still doesn’t close, and I have to extend the closing date once again? Can seller walk away with my earnest$ even though I haven't be rejected by the lenders?

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Well.............from what you shared, apparently you have an agent.............and this agent "advised" you to waive your mortgage contingency?
Seriously?

How is your agent responding to the questions you posted above?

You sure left yourself up a proverbial creek without a paddle.

Could the seller walk away if your mortgage isn't in place is a week?
sure, it's possible......
Could you lose all or part of your deposit money?
sure, that's possible, too since you no longer have the mortgage contingency as protection

In regard to what happens with the escrow money if you need another extension or are turned down for the loan - your contract should spell that out............in my area, with a breach of the contract, the money would be held until a new buyer was found. If the sellers ultimately incurred a loss, they would be free to apply the escrow against the loss - or, if the loss exceeds the escrow, they could sue for that higher amount.
In some contracts, the excrowed money is used as "liquidated damages", which means the seller gets that amount, but can't sue for more.

So............imo,
You need to check in with a RE attorney to find out just how large your liability is if you don't get your loan approval within the designated time frame.

When loans take longer than expected.....usually (in my area) the sellers will grant an extension, and do not threaten to walk away.
Why would they want to lose you as a buyer and start the selling process all over again?
Sounds like someone negotiated for them, getting them a stronger position.

Good luck - hope it works out for you.......
0 votes Thank Flag Link Thu Nov 8, 2012
You didn't happen to get your LO's guarantee in writing did you? Was there a reason given by your LO why you don't have an approval yet? It had better come through quick if you only have 5 days to close. Ask you LO what the turn time is for doc's after approval assuming the Under Writer doesn't have some prior to doc conditions. I would not release any funds to the seller for an extension, leave your earnest money in escrow. You may want to seek some legal advice regarding your questions about the earnest money in the event your loan doesn't come through. Does the seller really want to walk and put the property back on the market and wait for a new buyer or are they lined up to buy? Good Luck
0 votes Thank Flag Link Thu Nov 8, 2012
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