Cancelling a purchase contract before removing loan contingency

[Saeed Hadian]

Hey guys,

I was in a contract for a duplex in California and had my appraisal and loan contingencies in place. The appraisal came at value but for some reason (finding discrepancy in rent info between listing and seller's disclosures), I decided not to remove my contingencies and cancel the contract. To clarify, my loan was not denied but I had my contingency in place. It's been a week and seller has not signed the cancellation letter yet, they don't respond to our calls or emails. I need my deposit back in my account ASAP for another purpose. Is there anyway to push the seller to sign the letter or somehow expedite this process?

Thank you.

[John Clark]

"I was in a contract for a duplex in California and had my appraisal and loan contingencies in place. The appraisal came at value but for some reason (finding discrepancy in rent info between listing and seller's disclosures), I decided not to remove my contingencies and cancel the contract. To clarify, my loan was not denied but I had my contingency in place. It's been a week and seller has not signed the cancellation letter yet, they don't respond to our calls or emails. I need my deposit back in my account ASAP for another purpose. Is there anyway to push the seller to sign the letter or somehow expedite this process?"
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You had an appraisal contingency, and it was satisfied. You had an inspection contingency, and it was satisfied by waiver. You have two remaining grounds for voiding the contract: financing, and fraud in the inducement.

As others have said: Would FHA lend to you using the proper, accurate, rent rolls? If not, then your financing contingency is NOT satisfied -- the approval was based on false material information. Don't go to closing only to find out that FHA has backed out of the loan because it re-ran its numbers using the good data. So financing contingency satisfaction is "maybe."

Finally, there is fraud in the inducement: The seller gave you false material information with the intention that you rely on it. Others have pointed out that some contracts have buyer's-burden-to-verify-information clauses, but in most states that probably won't excuse a seller lying about information solely in the seller's knowledge. Not that the buyer can ignore signs that the seller is lying, mind you, but buyer's-burden clauses are not usually get out of jail free cards for sellers.

With the real data, does the property: a) satisfy the FHA for lending to you (YOU don't want the FHA coming back at you for fraud), and; b) satisfy your investment goals? Your answers to those determine whether you want to proceed.

I typically steer clear of dishonest sellers and dishonest buyers.