TREC 20-7 - Termination of Contract due to Lender Underwriting Requirements and Refund of Earenst Money

Asked by John, Texas Sun Aug 3, 2008

My questions is regarding 4(A)(1) of TREC 20-7 (TEXAS). If a buyer has gone through a local mortgage broker, been approved for financing, but the lender refuses to finance the purcahse becasue the home is listed as a condo and not a single family residence (home), and the selling agent is attempting to push the buyer to use "her finance guy" who will do the deal (but does not have the buyer's file and can not guarantee the terms), and the buyer refuses to go through the seller's lender...Upon termiation of the contract by the buyer under 4(A)(1) (Property does not satisfy the lender's underwriting requirements for the loan), should the buyer get their earnest money back? Seems to me becasue the mortgage borker has tried seveal lenders, the buyers are approved for financing, and the property is not satisfactory for the lender, that the buyer has done their due diligence and should get their money back?????

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Elie Ilano, Home Buyer, Washington, PA
Thu Nov 14, 2013
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Britt, Home Buyer, Texas
Wed Dec 3, 2008
What did you find out? We just recently had this exact same problem in Texas. We're still waiting to find out from our title company.
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Margaret T.…, Agent, Conroe, TX
Thu Aug 7, 2008
Something is wrong here, You would not have to accept terms higher than were written in the Third Party Financing Addendum, so the other lender would not force you to take terms other than what you agreed to with your purchase offer. The 15 days had to do with your financing approval not the property being approved.
Did your Realtor fill out the Third Party Financing Addendum? Did you understand it?
And no you do not have to go to the Sellers Lender, If you have a letter of denial from a reputable lender or two that is certainly enough.
What do you mean "listed as a condo" are you talking about on the contract or in the MLS?
I am not an atty. and if I am not to give legal advise but I would certainly want to ask one if a condo contract would be enforceable on a single family home.
I hope your problem has been fixed by now
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Gina, Home Seller, 48009
Sun Aug 3, 2008
A letter from the Mortgage Broker stating they could not approve you for the loan should be sufficient to get your earnest money back granted your purchase agreement provided that clause.
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John, Home Buyer, Texas
Sun Aug 3, 2008
Once they open the door to the other lender, then they are on his terms. Basically, they do not trust the selling agent or the other lender. All he would have to do is claim he can make the loan with unfavorable terms and they are out of the Earnest money and still without a good loan. He is making open promises without seeing the buyer's file. They are past the 15 days to get out based on the terms of the loan. Why do you think the buyer is not entitled to the money?
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Bruce Lynn, Agent, Coppell, TX
Sun Aug 3, 2008
Nice fight......looks like the earnest money will be tied up at the title co until someone gives.
Why would the buyer not "try" the lender who thinks they can get it done?
All lenders are not alike.
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