My buyer is in breach of contract (doesn't have approval and never asked for extension) their lawyer says they have a verbal approval

Asked by Home Buyer, New Jersey Sat Jun 8, 2013

The buyer is 2 weeks past the date for being in breach, their lawyer told mine they have a verbal approval, closing was supposed to be in 10 days. They claim they are arranging for in title search in 2 days, how can they ask for a title search if they have no firm written commitment? Their agent keeps telling mine don't worry, I'm worried I have a house we put money down on and can lose everything. Who should have been on top of this my lawyer, my agent or both?

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Joan Congilose’s answer
Joan Congilo…, Agent, Freehold, NJ
Fri Jun 14, 2013
It sounds like your sale will come together eventually but it is doubtful if it will be in 10 days. Most lawyers will not vouch for a client and state that a buyer has a verbal approval unless it is true. In addition, they rarely order a title search, an added expense if they feel it will not close. Loans are taking longer than ever to get approved these days; especially FHA loans. If it makes you feel more comfortable have your Realtor or Lawyer call the lender directly for an update. I do it all of the time to put my sellers at ease when needed. Good luck and think positive!
0 votes
John Sacktig, Agent, New Jersey, NJ
Sat Jun 8, 2013
O.k.. standard saying - I am not an attorney and I am speaking from expereince, of course, continue to talk to and discuss with your attorney.

The buyer is not " in breach" of the contract because of the late mortgage commitment. This is common, It happens a lot and is probably not the buyers fault at all. Mortgage people... they promise everyone the world, when in fact the mortgage rep is not the person to give the buyer the commitment. They can order title, they do not need a commitment to do so. If the attorneys have a verbal, it is probably good.

And no. you just can't "keep the deposit" it does not work like that at all. And no, there is no liability of the buyer’s agent regarding the mortgage commitment. The buyer agent or either agent for that matter has nothing to do with the mortgage, attaining the mortgage commitment or anything to do with it.. of course we can ask.. but not much more than that. The commitment date is part of the contract and the attorneys are aware of the dates.

"Time of the essence" means that the performance by one party to the contract at a specified location, date and time is required in order to require performance by the other party to the contract, and a failure to perform by the time specified will be a breach of the contract.

So, time of the essence would come about if you did not close on the closing date, the seller attorney would put time of the essence to the buyer to close by a certain date ( usually within 10 days) to close or be in breach of contract and face legal consequences. Also note, there is probably a mortgage contingency in the contract stating if the buyer cannot get a mortgage, they cannot buy the house….

Has the buyer indicated they can NOT get a mortgage or that they do not have the commitment yet.. two different things..... Good Luck and let us know how it turns out.
1 vote
Barbie_munier, Home Buyer, Oklahoma City, OK
Sun Aug 3, 2014
I own a home in Texas. I am selling my home. I explained to the buyer that I would need about $20.000 up front so I could put it with the funds already in my procession. He ask me how much I wanted for my home. I was asking 32,000, I took his offer for 30,000. I agreed to take his offer, but please remember that I will need the 20,000 before I can move. He said that he would contract his back and get me the money. I agreed, we shook hands on the agreement. This was before a contract was written. I have never sold a house myself before. I always in the past used a realtor and my ex husband took care of the buying and selling of all homes we bought in the past. I had found a house in Oklahoma and they needed proof of funds, due to it being a REO. I called Jerry and ask him if I could get some proof that he is buying my home. He said he had never heard of any one needing proof of funds to buy a house. I had my realtor from Oklahoma talk to my Jerry on the phone to see if he could explain why the proof of funds is needed. After the phone call Jerry still continued to say he never has heard of such a thing. I told Jerry that he promised he would give me money upfront, but now he is backing away from his promise. He then brought a blank contract to me to fill out. My realtor and myself were hoping that we could use the contract for proof of funds. I filled it out, keep in mind that I had never filled one of this before, all the realtors in the past had done this for me. In the field where it ask the purchase price, I put $30,000. It then ask how much money the buyer was paying at closing, I also put, 30,000. I told Jerry I still need that 20,000, he said we already shook on it so it is done. We both signed the contract on July 19, 2014, closing date August 31, 2014. I scanned it to my realtor. Jerry had told me that he needed the contract in hand by July 23, 2014 to take it to the bank to get the loan processed and get appraisal started. On Monday July 23, 2014. I called Jerry and he ask if I would take the contract to Premier Flooring and give it to Jennifer. I ask him again about he $20,000, he said he would take take of it. I ask him if it needed the Warranty Deed, he at first said no, the said sure I would like to have. I took the Warranty Deed and the contract to Premier Flooring and as I gave it to Jennifer, I ask Jennifer to Please remind Jerry that I was really in need of the 20,000 he promised me so I can purchase another house. I ask Jennifer to have him call me. I never heard back from Jerry . I called and left him a message to call me, still Jerry never returned my call. On July 26, 2014, I called Premier Flooring to see if Jerry was there, and was told by Jennifer that he was on vacation in Colorado, but would be returning on July 27, 2014. I ask Jennifer if she had been asking Jerry to call me because I need that 20,000. he would have to get a Title Commitment to make sure the house was clear of any lien's. I ask her if he had started that process yet? She wasn't sure. I then told her that I would call Edith at the title company and check to see, if he hadn't started it yet then I would do it for him. Well I called the Title company and was told by Beth that she herself was unsure of what was going on. She told me that she had started the process and then was told by AIM Bank that everything was put on hold until further notice. I am now not sure myself of what is going on. I called Jerry again and left him a message letting him know that it is so vital that he call me. At this point I am not sure if the bank is going to give him money or what. Here it is now August 3, 2014, and I have yet to hear from Jerry. Since he is not contacting me I am ready to just pull out and not sell him my house. I know for a fact that the house appraised for an amount much higher the offer. Can I back out of the sale due to breach of promise and no communication from the buyer?
0 votes
Bill Eckler, Agent, Venice, FL
Sun Jun 9, 2013
Guidelines are pretty simple....when attorneys are talking to attorneys it's always best to take a big step backwards and let them go at it. The fact that you are seeking advice beyond that of your legal representation is not something anyone in this forum should address.

Respectfully,

Bill
0 votes
Andrew Tisel…, Agent, Clifton, NJ
Sun Jun 9, 2013
This question has been addressed well. I,d like to add that unless you have another buyer paying cash, it will take a lot longer for you to sell if you back out now. Best advice is be patient and wait. Buyer is still spending money on title is a good sign. They have more invested in the deal. This is all very typical.
0 votes
Deborah Madey, Agent, Brick, NJ
Sat Jun 8, 2013
Mortgage commitment is not needed to order a title search. Typically, title is not ordered until after mortgage approval, appraisal and inspection, because it costs the buyer money. The fact that the buyer is ordering title is a good sign of their intent to close.

The buyer is not in breach. They have until the mortgage commitment date to cancel the contract without penalty if they do not secure a mortgage. Their deadline for that has passed. However, it's not an automatic waiver of 100% of their deposit if they do not close. If/When there is a breach, the injured party may seek compensation to make them whole. If a seller is financially hurt due to a buyer breach, part or all of the deposit may be provided to the seller to offset any loses the seller incurred. That amount is usually negotiated, but sometimes needs a judge. Your attorney can guide you best on this matter. We are not attorneys here and this is not legal advice. This info is limited to what I have witnessed is prior transactions through the years.

Closing dates in NJ are "on or about" unless the contract specifically called for 'time of the essence'. If things are running behind and you are close to the closing date, you may have a delay. That is not considered a breach of the contract absent the "time of the essence" clause. Again, this info is predicated upon what I have witnessed. I am not an attorney and this is not legal advice. Check with your attorney.

You agent and attorney both monitor the dates and performance of the buyer and encourage the buyer to provide updated information on the progress of the transaction, and to meet deadlines.

Lenders are often behind delays in mortgage approvals. Your buyers may be fine, and simply caught up in lender caused delays. There may be problems. The best solution is for your agent and attorney to keep regular communications going with the buyer side. Your agent can't force anything to happen, but communication certainly helps.
0 votes
Thank you, your info was very helpful and did make things clearer. I need to keep on my agent and attorney as both seem to be falling behind on things. Again, many thanks!
Flag Sat Jun 8, 2013
Joseph Scroc…, Agent, Wildwood, NJ
Sat Jun 8, 2013
First, a buyer is not in breach if they don't have a mortgage commitment by the commitment date. At that time the buyer can do 1 of 3 things, first, request an extension from the seller to extend the mortgage commitment date (which you said did not occur), second, the buyer and seller can proceed without the mortgage commitment but if the buyer can't close the seller can keep the buyer's deposit and third, the buyer and seller can cancel the deal.

In South Jersey, unless there is a "time is of the essence" written in to the contract the buyers have been given leeway by the courts to get an automatic 30 day extension for the mortgage commitment whether the buyers and sellers agreed to that or not. As long as the buyer has made a good faith effort to get the commitment on time, without time is of the essence in the contract, I don't think your buyer breached the contract (but I am not a lawyer and this is only my opinion from specific deals I have been involved in).

Your agent should have been on top of the dates though and if they were not pro active to get the commitment in time and the buyer has a loss the buyer's agent may have some liability.
0 votes
Thank you for responding. Does verbal approval hold any water? Does it mean they will have a formal written commitment? My lawyer is sounding doubtful ( he wished me luck! Not a good sign) . My agent said oh don't worry we will just re-list it, it's easy for them to be so carefree when it's my life they are tossing about, I have another home I have a lot of money deposited on.
Flag Sat Jun 8, 2013
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