What rights do sellers have when the buyers having problem securing a loan before closing?

Asked by Asukabehime, Thu Jul 19, 2012

Our buyers just informed us that their lender could not offer them a conventional loan (even though they were pre-qualified). This sent them scrambling for a new lender when we are less than two weeks before closing. The buyers could yet pull this off. And we wish fervently that they do. They have found a new lender and are pre-approved (again!) for the loan.

But if they could not secure the loan with the new lender before closing, what are our rights as sellers? What can we recover? If the sale fails, the financial impact to us will be quite significant, since we will be paying two mortgages.

Please advise and thank you in advance.

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Angela Shopp…, Agent, Lenexa, KS
Thu Jul 19, 2012
If you are using the standard KCRAR contracts:

page 5:
BUYER may obtain Loan(s) different from those described herein provided that the terms of the Loan(s) do not result in additional costs to SELLER, delay the Closing date, or change the Loan approval time frame. These changes must be agreed in writing, by both parties, within 3 days of BUYER’S knowledge and no later than ____ business days before Closing (15 days if left blank).
BUYER and SELLER are hereby informed that any changes to the terms below after the Effective
Date of the Contract have the potential to delay Closing and/or change costs due to federal regulations.

page 6
SELLER is aware that pre-approval is not a guarantee that BUYER will receive Lender(s)
Loan approval(s).

page 7:
LOAN APPROVAL(S). BUYER agrees to make a good faith effort to obtain a 324 commitment for the
Loan(s) within __________ calendar days (30 days if left blank) from the Effective Date of this
Contract (the “Loan Approval Period”) or within ________ calendar days (5 days if left blank) prior to
the Closing Date, whichever is earlier.

If BUYER is unable to obtain a commitment for the Loan(s) within the Loan Approval Period,
BUYER or SELLER may cancel this Contract by written notice. If BUYER is unable to obtain the financing described herein, BUYER must provide written evidence of rejection from BUYER’S
Lender(s). In either case, BUYER’S Earnest Money will be subject to the provisions of the Earnest
Money and Additional Deposits paragraph of the Contract.

Hopefully this answers some of your questions - interpreting the legal ramifications of the contract would need to be addressed with an attorney.

Thanks and good luck in closing - If it is any consolation, i have had deals nearly fall apart over lending and have had great success in changing lenders if the first lender has reached a roadblock in underwriting. Each lender's underwriting rules can be different so keep the faith and try to work with your buyers to close the deal. It is usually still faster to re-do the loan for the existing buyer than to start looking for a new one.

Angela Shopper 913-707-6884
1 vote
Guy Gimenez, Agent, Manchaca, TX
Thu Jul 19, 2012
First, as you now know a preapproval letter from a lender is useless as a third ear. It is merely a piece of paper with no real meaning or value.

Next, your guiding document regarding remedies in the event of buyer default will be your contract. All will be spelled out in the document signed by the respective parties. No one here has read your contract and therefore no one here can provide you a specific answer to your question.
0 votes
Shanna Rogers, Agent, Murrieta, CA
Thu Jul 19, 2012
Hi Asukabehime,

You need to refer to the purchase contract all parties signed - and any counter offers and/or addendums done. It should state in there what your possible recourses can be. It will also state if there are any contingencies (such as the buyer having a loan contingency, etc.). Talk to your Realtor if you don't fully understate the purchase contract, counter offers, and addendums (if there are any).

Good luck!!

Shanna Rogers
SR Realty
0 votes
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