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Can I back out of a home purchase if my financing contingency requires a type of mortgage I don't have?

Kevin - 2009-03-28 16:42:59 - Renting Real Estate

I signed a purchase agreement in January, and wasn't to close until June. A change of circumstances has come up which, unfortunately, makes it impossible for me to live in the house. I contacted the realtor and explained the situation to the sellers, and I even offered some cash in addition to the earnest deposit money to make up for the two months the house was off the market. The sellers refused the offer, and said they may sue me for specific performance. I was looking for loopholes, and according to my financing contingency addendum I must be able to secure a conventional or privately insured conventional mortgage. I've already been pre-approved for a loan, and the lending agent said he's not going to deny me for the loan even though I told him I can now no longer comfortably afford the house, but the only loan I was approved for is an FHA loan. Is this something I'll be able to use in order to get out of the contract?

Best Answer:

It maybe worth your time to have a lawyer review the sales contract; it’s hard to say without knowing all the facts what your potential liability maybe Though in general, while a civil remedy under contract law is specific performance where the courts force you to perform the contract, it’s a very expensive litigation process to commence, its usually brought by the buyer to force the seller to hand over, very rarely a seller will succeeded in forcing the buyer to actually buy, to many factors outside the courts control, for example the loan Many factors can happened during the litigation process that would make it impossible for you to obtain a loan, so the suit is fruitless if you can not obtain a loan based upon change of facts during the litigation, so in my opinion the seller is bluffing on the specific performance complaint, best bet is to spend a few hundred and consult a lawyer

Answers:

It maybe worth your time to have a lawyer review the sales contract; it’s hard to say without knowing all the facts what your potential liability maybe Though in general, while a civil remedy under contract law is specific performance where the courts force you to perform the contract, it’s a very expensive litigation process to commence, its usually brought by the buyer to force the seller to hand over, very rarely a seller will succeeded in forcing the buyer to actually buy, to many factors outside the courts control, for example the loan Many factors can happened during the litigation process that would make it impossible for you to obtain a loan, so the suit is fruitless if you can not obtain a loan based upon change of facts during the litigation, so in my opinion the seller is bluffing on the specific performance complaint, best bet is to spend a few hundred and consult a lawyer

If the contracts states that the loan is contingent on your securing a loan you can get out of this.. BUT the bank must decline the loan! That loan officer needs to be shot.. people like him created the current housing/banking crisis.. He has to consider your new income ratio and if it does not qualify he must decline the loan.. that's the bottom line unless your new income qualifies. You need to look into your local state banking laws (if any).. the loophole is with the loan.. You need to get it declined.. Have you had the home owners inspection? Does your contract state that sale is contingent on the inspection? That is the only other avenue out of this purchase.. You have the right to bring in a home inspector, engineer, and/or anyone you deem fit to inspect the integrity of the home.. If you find major foundation, termite infestation, mold etc etc.. you can back out if the sellers are not willing to deduct the cost and/or make repairs.. But you need to request that they make repairs to every single thing the inspector finds..be a pain in the bum over it! If they choose to make repairs "YOU" make sure that you have the building code enforce involved.. they will tell the sellers how it must be repaired and they will inspect the process...you also have the right to bring someone to double check that the work was completed in the proper fashion.. most sellers do not want this headache and agree to back out and find another buyer. This in fact was my way out of a purchase.. also if they prohibit you from bring in an inspector and/or engineer they breach the sales contract.. as they will be prohibiting your the right to exercise due diligence with the property... Have you completed the title search? Did it come back clean? A bad title is another way out of the contract.. If either of these methods fail .. I think you are stuck in an court battle with these people.. Yes get an attorney to review the contract to see if the contract is legal!! NEVER purchase a home without an attorney.. so many important steps like attorneys review..