Home Buying in 94087>Question Details

Preeti, Other/Just Looking in Santa Clara County, CA

I signed off the loan contingency based upon a letter from my loan agent asking me to do so. Now he is not able to close in time. What are my options?

Asked by Preeti, Santa Clara County, CA Tue Aug 24, 2010

He wrote to us many times that we should remove the contingency and that he will
be able to close on this. So we went ahead and removed it.
After that he changed banks on us without letting us know (we suspect due to
fall in interest rates) and took another week to transfer paperwork from bank 1 to bank 2.
The second bank did not agree to honor the appraisal and
did its own appraisal .. all of this took additional time.

Today we are approved and waiting for closing but our 30 day time is up. The seller is asking for $200/day for the delay.
If we refuse to pay and the seller decides to run away with our escrow; I want to understand if we have legal recourse with our loan agent.

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Ruth & Perry Mistry’s answer
Hi Preeti:

Right the seller is entitled to Interest + Insurance + Taxes at a minimum on the home you are late on per day.
Remember, they are paying mortgage, insurance and taxes for every day you are late on.

Yes the seller can also pursue other damages. But the $200 a day cannot be an arbitary number, the seller has to show costs and damage. Rest assured it wont be $200 a day, once lawyers are involved.

Ask your Real Esate agent who should be separate from your Loan Agent to find out, what the sellers are loosing a day. Your Real Estate agent, will have to now perform above and beyond, to keep this transaction together, and minimize your pay out.

You may have a recourse against your loan agent, provided he is with a solid company with insurance,
otherwise, with a mickey mouse company, you can win the case, but the company can go bankrupt
and you are wasting your time.

Good luck.
0 votes Thank Flag Link Wed Sep 1, 2010
Your client is looking to you for advise in this situation. THE QUESTION IS HOW DO YOU ADVISE YOUR CLIENT? I would advise my Buyer client to call their bluff, if the loan is already approved and waiting on a closing date. The listing Agent would not be working in favor of their Seller's best interest if they advised them to walk away at this point. The Seller can not just walk with the escrow money without a signed release from the Buyer. If if the contract becomes VOID a release of earnest money must be signed before it can be distributed. **South Carolina Law** YOU must fight for your Buyers best interest in a situation like this.
0 votes Thank Flag Link Mon Aug 30, 2010
I would ask the seller and the seller's agent to be more understanding with the situation and work on getting to a situation that everyone can agree with. I would also go back to the loan officer and make sure that he/she knows that their error is costing you money. When loan officers make mistakes like this, they will often cover the costs you incur. Not always but often.

If an attorney is necessary, your agent should be able to refer you to a good one. If not, have your agent call me and I can provide the names of three of the best real estate attorneys in the area. Very well known and very good.

Good luck!
0 votes Thank Flag Link Sun Aug 29, 2010

What is your real estate's suggestion?
He or She will your best resource. Our suggestion is ONLY a reference.

From what I understand you are kind of removing loan contingency before it was approved.
Did your agent or you let the loan agent know this matter? No one will force you to pay if you don't agree.
Please ask both your real estate agent and loan agent to work together with the seller's agent and seller.
I think everything will be fine.

Good luck.

Grace Keng
Web Reference: http://gracekeng.com
0 votes Thank Flag Link Sat Aug 28, 2010
As you have most likely read, real estate agents can not give you advice on a legal nature. We also, don't have access to your written information which would detail what transpired and what are your options. With that said,
I read into this that perhaps you are purchasing a home in a new community and the builder's addendum has a $200 per day penalty? Perhaps you didn't use the builder preferred lender and their community sales agent wrote the contract? In any event, you should seek the advice of a real estate attorney, and request what your options are from your loan agent and any agent who represented you.
Web Reference: http://terrivellios.com
0 votes Thank Flag Link Wed Aug 25, 2010
Hello Preeti,

If you have it in writing, I would ask the loan officer to pay for the per diem. He had no right to ask you remove a contingency, especially one where there would be such consequences. Good luck.

Kamal Randhawa
0 votes Thank Flag Link Tue Aug 24, 2010
Hello Preeti and thanks for your post.

Unfortunately, your best and most accurate advice will come from an attorney specializing in real estate law. However, in my unlegal opinion, if you want this home, I'd move quickly to press forward.

The seller is asking for $200 per day in penalties for failing to close on time? You aren't perchance talking about the purchase of bank owned property, because that is one of the few times that I've seen a Per Diem penalty imposed. If the property being purchased is an REO property, AND your Realtor is unable to negotiate the removal or reduction of the penalty fees, then your best bet is to pay the $200 penalty and move quickly to close escrow--especially if you still really want the home. At this time, it's certainly NOT the seller's fault that your escrow is not closing on time, so you might not expect any accommodations or assistance from the seller. Further, exacerbating the situation by waiting and accumulating additional expenses or jeopardizing all or part of your earnest money deposit also provides you with no relief for your situation. So press forward and close escrow.

As to who will pay the $200 per day fees, this is a matter to be discussed between you, your Realtor, the Realtor's broker, and your mortgage lender. As the others noted, you certainly should have been consulted regarding the loan and the subsequent change in banks, and this matter can probably be resolved after the close of escrow.

In the meantime, talk quickly with an attorney and press forward. Work with your agent to forge an amicable solution to this problem. I wish you very good luck!

Grace Morioka, SRES
Area Pro Realty
Sunnyvale, CA
0 votes Thank Flag Link Tue Aug 24, 2010
Hello Preeti, you have a myriad of issues here that cannot be answered correctly by anyone without reviewing your purchase contract terms and conditions of the sale. Your first resource should be your Realtor or the real estate agent who wrote and submitted your purchase contract to the seller on your behalf. They should be able to help guide you in the right direction. Please don't tell me that the listing agent also represented your purchase!
0 votes Thank Flag Link Tue Aug 24, 2010
Seeing as it appears that you are using a broker, they loan officer should be licensed. Do they have a 5 digit number in their e-mail signature or on their business card? This is their NMLS number, which is the national mortgage licensing system registration number. I would report that loan officer, because unless they were ready to get you closed, there is no reason to do that. At the very least, they should get you cleared immediately with the first lender.
0 votes Thank Flag Link Tue Aug 24, 2010
Talk to your Realtor and have him fill out an addendum for an extention of time on the closing day. Congratulations on buying a home. Which one did you buy? If I can be of any help call or email me.
0 votes Thank Flag Link Tue Aug 24, 2010
A financing contingency is obviously meant to protect you. Maybe I'm missing something here but I'm not sure why a lender would be asking you to remove a financing contingency. I have never had a lender urge my clients to remove a financing contingency. Did your agent advise you to do this as well? I suggest you seek advice from a real estate attorney. Good Luck.
0 votes Thank Flag Link Tue Aug 24, 2010
Negotiate with the seller and call a lawyer!
0 votes Thank Flag Link Tue Aug 24, 2010
Usually good communication avoids (or at least minimizes) these situations. You are correct that your loan agent should have asked you before switching banks. He should have explained to you the pros and cons and risk vs. reward. Furthermore, if your agent keeps the listing agent informed of progress and delays and shows that you are putting your best effort, usually the seller is ok with a couple days delay. I suspect sthe seller was taken by surprise, had already made arrangements based on expectation that you would close on time, and got hit by some penalty and/or inconvenience when they discovered the closing would be delayed.

As far as legal recourse, I'd concentrate on getting the deal closed ASAP first to minimize the damage, then see what your loan agent can do for you to make it up to you before getting lawyers involved. Lawyers may end up costing more than $200/day.
0 votes Thank Flag Link Tue Aug 24, 2010
What does your agent say? And what did your agent say at that point before you removed the contingency but after the broker assured you that financing was set?

You definitely should see a lawyer on this one. The mortgage broker may well have some liability in this situation.

In the meantime, you (or your agent, really) should try to reduce that $200/day amount. But--especially if that's what's provided in the contract--that may be difficult to overcome.

Finally--and check with your Realtor--it's unlikely the seller could "run away with our escrow." I'm not licensed in California and don't know California practices, but in many states the escrow will only be released upon the signatures of both the would-be buyers and sellers. In other words (in many parts of the country) you'd have to agree to the release.

So: Check with your Realtor (about the fate of your escrow as well as negotiating the $200 per day down) and with a lawyer (about whether, and to what extent, the mortgage broker has liability in the issue.

Hope that helps.
0 votes Thank Flag Link Tue Aug 24, 2010
Don Tepper, Real Estate Pro in Fairfax, VA
That wasn't the brightest move for either party. I think you'll find legal recourse will be more costly and time consuming then the benefit you may receive. How much can you even expect in punitive damages? I'd call this one of life's lessons and enjoy your new home. .... Happy funding, Rudi
Web Reference: http://www.umboc.com
0 votes Thank Flag Link Tue Aug 24, 2010
Hi Preeti, For the purpose of full disclosure only an attorney can give you legal recourse answers.

We here can try to help find solutions that mitigate the need to go "legal".

I would suggest that your Realtor advise you as to the options you have in your contract. That is the best resource for contractual questions.

Based on an ordinary resale purchase contract you have little room to fight their desire to be compensated for a contract where contingencies are removed. In other words you would be in breech without additional addenda supporting a granted extension of terms.

Usually, good faith and due diligence removes this obstacle -moving forward in good faith and showing a positive conclusion through solutions.

0 votes Thank Flag Link Tue Aug 24, 2010
Hi Preeti,
Sorry you are having to go through this. My first advice would be to get an extension on the COE, but it sounds as if the seller won't do that without a penalty. Certainly, $200/day is painful, but far less severe than losing both the home and your deposit. As for recourse against your lender, you should seek legal advice from a qualified real estate attorney and they don't post on Trulia.

Good luck,
0 votes Thank Flag Link Tue Aug 24, 2010
Hi Preeti,
I am so sorry that this has happened to you.
Your situation isn't clear, but if the lender is asking you to remove contingencies does that mean that he is also representing the seller?
Your own agent should be able to advise you on this, but you if the lender has given you written advice to remove contingencies it would be very very unusual. Have you considered asking the lender to contribute to your costs? I would possibly suggest allowing the loan to close first, so that any action you affect the terms of your contract any further.
As far as legal recourse, it seems to me that it might be worth your while to contact an attorney. The Santa Clara COunty Bar Association has a list of lawyers who will provide a 30 minute free consultation which might help you decide whether it's worthwhile for you to pursue this.
0 votes Thank Flag Link Tue Aug 24, 2010
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