We just pre-approve for FHA and agent decline us for the home saying seller would not sell for FHA loan buyer. Is it illegal, please help?

Asked by Maggie.x.cheungblaize, Albertson, NY Wed Aug 22, 2012

Help the community by answering this question:

+ web reference
Web reference:


Nina Harris’ answer
Nina Harris, Agent, Williston Park, NY
Sun Oct 14, 2012
Yes. The seller can refuse to take an offer with an FHA loan. One of the major reasons is that the requirements for the condition of the home is a lot tougher and the loan could possibly not go forward. The seller would be forced to take care of certain aspects of the inspection report whereas with a conventional loan the seller could either decline to fix or negotiate.
0 votes
Anna M Brocco, Agent, Williston Park, NY
Thu Aug 23, 2012
Unfortunately the owner can refuse any offer regardless the type of loan....
0 votes
Roland Vinya…, Agent, Sprakers, NY
Thu Aug 23, 2012
The owner is only "obligated" to sell for full price for a non-contingent sale, meaning nothing for the buyer to sell first and no loan needed. Even then, he could refuse, but could face legal repercussions, should the buyer wish to take him to court. In the practical world, it is almost impossible to FORCE someone to sell.. or to buy. Fortunately, nearly all the time both parties WANT to make it work and therefore work in closer harmony than you have experienced.
0 votes
So what is the argument for the court?
Flag Mon Jun 26, 2017
Jeff Stone, Agent, Port Washington, NY
Thu Aug 23, 2012
Hi Maggie, the answer to your question is that it's not illegal. The owner unfortunately has the right to refuse selling to a buyer with an FHA loan, even though they have a pre-approval. The FHA loan requires the seller to make improvements to the home if any are needed, thus making an FHA loan less desirable. A low down payment may also make the seller nervous about the buyer's financial stability.
I'm a certified buyer representative and can help you with the purchase of a home. I've helped + are continuing to assist buyers, including ones with a pre-approved FHA loan, to move forward in the purchase of their dream home.
Don't ever expect a listing agent to work in your best interests, as their fiduciary obligation is to their client, the seller.
Contact me:
Jeff Stone
0 votes
Janet Nation,…, Agent, Baldwin, NY
Wed Aug 22, 2012
No it's not illegal.

I would try to find out the reason from the agent why your offer was declined. Is it because:

(1) the house may not pass FHA guidlines and the owner is unwilling to do the repairs or

(2) It's an older owner unfamiliar with a very legitimate product and cannot grasp the concept of the sigificantly lower down payment option. In that case it's really up to the listing agent to educate the seller unless the listing agent is also clueless on how FHA works or affraid to upset the seller.
0 votes
Terry Farnsw…, Agent, Lisle, IL
Wed Aug 22, 2012
Hi Maggie,

Most likely, the agent for the seller knows of issues with the home that would present problems for the FHA appraisal/inspection that would ultimately be performed.

FHA has a set of "minimum" standards that the property must meet to qualify for the financing. If there are any major issues with the property, i.e. structrual, plumbing, etc, etc. the property may not qualify for the financing, potentially killing the deal - or at least forcing the issue to be remedied prior to approval. If the agent knows of these problems in advance, they will simply not accept FHA to avoid the deal falling through as a result of the property not meeting the FHA standards.

Hope this helps!
0 votes
Jim Olive, Agent, Key West, FL
Wed Aug 22, 2012
No, that is not illegal. That is one of the many forms of LEGAL discrimination still practiced in the world (like only letting women use the ladies room!). Sellers can decide which forms (or no form) of financing are acceptable in the purchase of their home. Many people do not want VA loans because the VA can make them pay for certain things that would otherwise be an expense to the buyer. I"m not sure why someone would refuse FHA, other than the fact that it is designed for buyers with difficulty making a larger downpayment, so they may be worried about the financial strength of the potential buyer, and therefore that buyer's ability to follow through with the deal? I'm only guessing as to why, but I'm quite sure it is NOT illegal. Best of luck to you with your real estate purchase...Jim
0 votes
Search Advice
Ask our community a question
Home Buying in Albertson Zip Codes

Email me when…

Learn more