Financing Contingency - Agreement of sale

[Jose Torres]

I have a property under contract, I am the seller and for the record I do want out of this contract. I received a conditional loan approval (CLA) from the buyers on 4/4 that still had several conditions that were not met, one being the buyers had not yet supplied the lender with 2 years of tax returns. A mortgage commitment date of 4/12 was anotated on the contract. I asked for the mortgage commitment letter (MCL) on 4/17, I did not receive one, I stated my intent in writing to void the contract on 4/18. The buyers claim that the CLA sufficies as the MCL. I disagree because on the CLA itself it states “This Conditional Approval is not an offer for the extension of credit or a commitment to lend, the terms and conditions are subject to change. If any items or conditions are not met to the underwriter's satisfaction this approval may be amended, suspended, or revoked.” I would like to hear from any RE attorneys or MLO‘s or anyone who has experience with this type of situation. Buyers are threating a law suit if I do not close. I would like to know if I am in the wrong or do I have a valid claim. Thank you.

This is specific to a Delaware sales contract. The financing contingency states the following:

6.FINANCING CONTINGENCY.

(a) Buyer’s obligation to purchase the Property shall be contingent on Buyer’s ability to obtain mortgage financing pursuant to the terms set forth below. Each of the terms below as applicable shall be deemed essential to this financing contingency and Buyer shall not make application for any mortgage financing the terms of which would differ or deviate from the requirements set forth below that would be adverse to Seller’s interest without Seller’s express prior written consent. The Interest rate shall be at the prevailing rate. Should, after Buyer makes application consistent with the terms set forth below, and has diligently and in good faith pursued that application, any commitment for mortgage financing that may be issued deviate from one or more of such terms, and Buyer elects not to accept the financing thus offered, or the application is denied, Buyer may, at Buyer’s sole election, void this Agreement, in which event all deposits will be returned to Buyer. The terms of mortgage financing are the following:

Type of financing: F_H_A__________________________ Loan Amount:$_2_4_0_,_56_2_________________________________ Term in years: 30_____________________________ Maximum loan to value ratio:_9_6_.5_%________________________

Final date for receipt of mortgage commitment, including the appraisal, if required by lender (the “Commitment Date”):

(b) Buyer will make written application in a manner consistent with that provided for above within calendar days of the effective date of this Agreement, and shall use their best efforts and diligently pursue such financing and promptly file any supplemental information, papers and/or other material that may be requested or required from time to time by the lender. If Buyer fails to make application as specified above, then Seller may declare Buyer in default of this Agreement by tendering written notice of that election to Buyer at any time prior to Buyer making application consistent with the terms set forth above. Should Seller elect to declare Buyer in default before such application is completed, Seller shall have available all the remedies set forth in this Agreement.

(c) Buyer shall provide Seller, or Seller’s Designated Agent, with a copy of any loan commitment or denial within 3 calendar days of receipt. If a commitment consistent with the terms set forth above, or one that differs from those terms which is nonetheless acceptable to Buyer is obtained, and said commitment (1) imposes financial obligations upon the Seller which the Seller has not previously agreed to pay, and does not then agree to pay, and/or (2) is contingent upon the sale of any real or personal property owned by Buyer, then Seller may within 5 calendar days after receipt of a copy of the commitment, cancel this Agreement in writing, and all deposit money shall then be returned to Buyer in accordance with provisions of this Agreement. If such notice is not given, Seller shall be deemed to have accepted said condition(s).

(d) If a written mortgage commitment is not obtained by the Commitment Date, Seller shall from that time forward have the right to void this Agreement by tendering written notice of that election to Buyer or Buyer’s Designated Agent provided, however, that if written mortgage commitment is received after the Commitment Date and prior to any such written notice of termination, then this Agreement shall remain in full force and effect, and Seller’s right to void this Agreement for failure to meet the Commitment Date shall be deemed waived. If Seller elects to terminate as set forth in this paragraph, and Buyer is not then otherwise in default of the terms of this Agreement, all deposit money shall be returned to Buyer in accordance with the terms of this Agreement. If Buyer at that time claims that the mortgage application resulted in a denial of that application, and has not provided a copy of that denial in a timely fashion as set forth in paragraph (c) above, the failure to provide a copy of that denial as required herein shall be deemed a default by the Buyer

(e) No representation is made by the agents or parties as to whether or not the Property will qualify for the type of

financing indicated.

(f) Buyer authorizes the mortgage lender and settlement attorney to share with the real estate agents and Seller the following documents in connection with their application for a mortgage loan: (a) any preapproval, (b) any pre-Loan Estimate of loan costs, (c) the Loan Estimate (and any revisions), (d) commitment agreement, (e) Closing Disclosure (and any revisions). Buyer authorizes settlement attorney to share the Settlement Statement (if any) with the Seller and real estate agents. If asked, Buyer shall provide the above mentioned documents directly to the real estate agents and settlement attorney if the lender does not provide them. This authorization shall expire upon written denial of the loan application.

[Stanley Bronstein]

I recommend you hire a knowledgeable Delaware real estate attorney. If you have a Buyer who is threatening a lawsuit, you need to make sure you have all your bases covered BEFORE you take any action. You need to know your options.