Home Buying in Marietta>Question Details

Sylvia, Home Buyer in Marietta, GA

My father and mother in law are in the process of getting a house for us. They made an offer on the house

Asked by Sylvia, Marietta, GA Sun Jan 6, 2008

and it went through. They were suppose to close on the 20th. Then something happened. He owns his own landscaping company so now they the banks think that he is going to use it for a business, but of course that is not the case because its for us. they made him sign paper after paper and they still dont know. He gave 1000 dollars as earnest money, but my question is that we been looking at other houses and there might be a possibility that we like this other house. we cant take all of this anymore..Will we be able to get our earnest money back since all of this is going on. What should we do we dont want to loose the money?

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Hi Sylvia,

Josh is correct in that your in-laws need to get with their agent; he/she needs to get with the lender and ensure that they are aware of the entire situation. Situations like this can be very tricky as there are a number of issues that should have/will need to be addressed.

Lenders are looking at self employed buyers and small business owners very carefully. Typically these are non conforming loans; the applicant doesn't have a "typical" job. Many lenders have stopped doing "non conforming" and "stated income" loans - I've seen times where loans have been pulled in mid stream.

If your in-laws own a home already, then this is in fact not their primary residence. There are many variable here, but suffice it to say that they can only have one primary residence; others are considered investment homes and lending parameters are different.

Not having the benefit of seeing the contract, here are my suggestions:

1. Have your lender tell you now whether or not they feel that this loan is viable. Time is of the essence here as you have a limited time for securing financing.
2. Have your agent carefully review the contract and the financing section, verify exactly how much time you have and if the option to cancel without penalty exists.
3. Discuss with your agent the options that exist should you already be past the expiration of the financing contingency. You may want to approach the sellers and negotiate an out.

Your agent should have taken the time to explain the potential financing issues that face your in-laws and what could happen in the event things fall apart. Your lender should have done the same. How the offer was written is another thing; did your agent write a strong offer that covered the potential financing issues and leave you with "escape clauses"?

Reading your post I can almost think that your father in-law owning this company came as a surprise to the lender; did they know this up front? Did your agent? Do you have an agent? There are a number of important things that either are missing or not clear in your post.

Bottom line is that you are bound to this contract unless you have an open and legitimate contingency. Without seeing how the contract is written it's impossible to render an opinion. If all contingency periods have closed, you may be bound to the contract and getting out of it will require negotiation with the seller. There's no way to say what the outcome might be, but it could range from loss of earnest money to suit for specific performance. They contracted to buy a home, they have a responsiblity to live up to that commitment.

An idea for you might be for your in-laws to co-sign on a loan for you. You need a competent agent with a strong working relationship with a reputable lender. I'd be happy to have a look at this if you'd like.

Hank Miller, SRA, ABR
Associate Broker & Certified Appraiser
REMAX Greater Atlanta
678-428-8276
http://www.hrmiller.com
Web Reference: http://www.hrmiller.com
4 votes Thank Flag Link Mon Jan 7, 2008
Sylvia,

Sorry to hear of your chaotic situation. Home buying should be fun and happy and not so stressful. However, its unfortunate that in this day and age - Generous parents can't just buy their kids a house anymore. There is so much mortgage fraud in the industry now, so many items have to be documented. Depending on your contract terms, your earnest money may be able to be refunded. Find out if the contract is contingent on financing and if you are within the terms of the contract. If you are unable to get this home due to financing than the same could occur with another home under the same circumstances. You might also want to have the financing part handled before putting in any new offers. Please let me know if I can assist you further . -Valerie 770-262-8480
0 votes Thank Flag Link Mon Aug 4, 2008
If your due diligence period is over, chances are you will lose your earnest money if you walk away. You may also want to note that your home owner's insurance will be higher since it is not going to be listed as a primary residence. Give me a call if you have any other questions or concerns. 404-934-4088-Jackie
0 votes Thank Flag Link Thu Jul 24, 2008
Sylvia, the problem is the bank see's this as a secondard property and wants to make sure what the intended use is for. Any purchase other than for a primary residents will be considered investment property and will have higher interest rates and demands for documentation. The bank is also making sure this isn't a "Straw Loan" which is when someone buys it for someone else. I personally don't see many co-signing mortgages making it through approval either. In today market if you cannot get personal approval for a FHA mortgage then I would wait it out unitl you can. You earnest money is something that no one out here can answer correctly with what you explained so far. Good luck. Contact me with any questions.
0 votes Thank Flag Link Wed May 28, 2008
Some very good advice thus far. My take on it: Straighten the current mess out. I'd personally try to get out of the deal...except, of course, I'm not sure whether you have any standing in this at all. Your inlaws made the offer, your inlaws signed the papers, your inlaws paid the earnest money. (Though I'm confused; you say your father-in-law paid the $1,000 earnest money, but you don't want to lose the money.)

Then, after everything is cleaned up, get yourself your own Realtor. Consider having your in-laws co-sign for you. The lender probably will ask that they be on the deed, too. That's fine. You and your in-laws should consider an equity sharing arrangement to specify both your and their obligations, and your and their share of the property. A real estate lawyer should be able to put one together fairly easily.

Then go to a mortgage broker, once you've determined what your role and your in-laws roles will be. Present the information to the mortgage broker, and find out what sort of loan programs will fit, what you all are qualified for, and so on. That will give you the information you need--how much you'll qualify for--on top of the question of how much you can afford--to go out with your Realtor and search for houses.

Hope that helps.
0 votes Thank Flag Link Thu Jan 10, 2008
Don Tepper, Real Estate Pro in Burke, VA
MVP'08
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There is so much negative news media about real estate agents and how they are overpaid and don't earn their commission. People are trying to go it alone without an agent and they can get themselves in trouble. Sometimes is best to start over. Try to get out of the deal, get your earnest money back if possible, and then get an agent yourself and don't use your parents to buy the home. The lender will lend money to the person is buying the home and will be making the payments. If your parents are making the payments and renting it to you that's different and it would be an investment home, not a primary place of residence. If they are not renting it out to you or making the payments then they shouldn't be getting the loan in their name. You should research and read up on mortgage fraud - it's a dangerous road with many pitfalls and a good realtor can help you avoid them. Get out, start over, and find a good realtor to help you.
0 votes Thank Flag Link Thu Jan 10, 2008
Your "in-Laws" need to get with the agent, It does not sound like you closed yet. Did the "in-laws" do an inspection?
It should not matter if the bank thinks he is using it for business. It is a second home anyways.
Have them call the agent and get him/her going.
Web Reference: http://www.kennaandco.com
0 votes Thank Flag Link Mon Jan 7, 2008
Your parents should consult with the Realtor (hopefully the one representing them). If they are signing documents that this home is not an home for the business then those are most likely LOAN documents and not related to the contract.

You should look at the contract itself. Most contracts will have a "binding agreement date" this is the date that "clock" starts ticking so to speak. From there you have a few timetables, again on most contracts. For inspections or loans or just plain due diligence. You need to find out if you are still in those timetables.

If you're outside of those "contingencies" then you are most likely risking losing your earnest money if you back out and move on to another home.

If he already owns a home and is buying another, the classification IS for INVESTMENT. Even if it's for you. In some cases they would call it a second home, but if the home is for you, then it's not a second home. Technically, it's an investment, albeit in you.

In a situation like this, it's good to back up and ask a lot of questions of the people who are supposed to be helping you. Your Realtor, your mortgage broker, ... etc.

Most of the answers you'll get are going to based on speculation since we don't know what your contract looks like or if you have representation, ect.

If you need further assistance, feel free to contact me.
Web Reference: http://www.jrjarvis.com
0 votes Thank Flag Link Mon Jan 7, 2008
Joshua Jarvis, Real Estate Pro in Duluth, GA
MVP'08
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