What's the point of having mortgage contingencies?

[Account Closed]

So my buyer was denied his loan after BofA (Bunch of @$$ho13z) screwed up his loan application and delayed the closing for three weeks. After he did everything they asked for and demanded. They even emailed him that the loam is approved and then yanked it because they resent the file to a different underwriter. Long painful story short, the deal is dead. Now even the seller's attorney is refusing to give back his deposit and 20% down payment! How is this possible?! It's not the buyer's fault and there is a mortgage contingency in the contract! The seller's attorney even works as a judge in his small municipality! Can anything be done to make this right short of litigation? I feel terrible for the buyer who lost all his money on title, survey, attorney fees and to add insult to injury, a sleazy judge/lawyer who defies contract laws! Should I be surprised this happened? The seller's attorney gave us nothing buy grief all along the way and even told the seller "I told you something like this might happen when the buyer has to get loan approval. Shoulda sold to a cash buyer." hello?! I bought a cash buyer for 15k less than seller wants and when she wanted more, I found this buyer who is will g yo pay the price but needs the loan to make it happen. Who else ever heard of something like this? Unbelievable!

[J Scott]

First, if his financing contingency extended through now, he should be able to use the fact that his loan was denied to back out of the deal and retain his earnest money. But, it sounds like that's not the case, so my question is, why not?

Second, I'm a big believer in controlling your own deals and doing whatever it takes to ensure that things stay on track. In this case, there are a few things you could have done differently:

1. First, find an awesome mortgage broker and try to get every one of your client's to use him/her. This one action has had a bigger positive impact on our business than anything else we've done. Our current broker has never missed a deadline or had a loan fall through after he pre-approved the buyer. Never.

2. Ensure that there was a financing contingency in place for a reasonable amount of time;

3. Ensure that the mortgage broker had a clear-to-close (not just a loan approval) before the financing contingency was up;

4. Ensure that the pre-approval provided by the broker/lender was actually meaningful. Very rarely do I see a buyer's financing fall through when it couldn't have been predicted upfront had the mortgage broker been honest about the buyer's ability to qualify;

5. Stay on top of the mortgage broker. This is the big thing. You should have been on the phone EVERY DAY ensuring that the loan was moving forward and that the approval would come prior to the financing contingency expiring.

It takes a lot of time and effort to do these things, but this is part of the job, and if you really do these things, you should never have a buyer lose an earnest money deposit again.