#HomeSale #RealEstate #MortgageApproval
Hey everyone! 🏡 Have you ever wondered if a buyer could lie about not getting their mortgage approved just to back out of a deal? 🤔 Well, I’m facing that situation right now with a buyer who hasn’t provided confirmation about their mortgage approval, even after I gave them an extension.
So here’s the burning question: Could the buyer be pulling a fast one by claiming their mortgage wasn’t approved when it actually was? And if that turns out to be the case, what can I do to protect myself legally or ask for proof of rejection from their bank? 🤨
Some possible solutions that come to mind include:
– Communicating openly and directly with the buyer to clarify the situation
– Seeking advice from a real estate attorney for guidance on legal protection
– Requesting documentation or proof from the buyer’s bank to verify their claim
What do you think? Any tips or insights to share on how to handle this tricky situation? Let’s discuss and help each other out! 💬 #Discussion #RealEstateAdvice
> Could the buyer intentionally lie that his mortgage was not approved to back out of the deal? If that happens, am I allowed to ask for proof of rejection from his bank or protect myself legally in any way?
The condition is probably written as something like “subject to available financing acceptable to the borrower”.
Even if the bank offers what you think is a reasonable mortgage that doesn’t mean the buyer has to accept it. The bank offered $500k at 4%, I don’t want to pay more than 1%. I couldn’t find anybody offering 1% or less so there is no acceptable financing and the deal is off.
These clauses are often used as “get out of jail free” conditions. If they decide they don’t want your house then they’ll just claim they couldn’t find financing at terms they will accept and that’s the end of it. There’s not much you can do unless the offer was very poorly drafted.
Nope, if they don’t remove subjects, the deal collapses.
While it’s true they could use the clause to back out of the deal, it’s unlikely that radio silence at this stage indicates that’s what’s happening.
Likely they are working hard to dot the i’s to make sure they have no risk of being unable to close after removing the condition.
Slightly less likely, but still common, is that they’ve done the leg work but will still not remove the condition until the deadline arrives.
Nothing you can do at this stage. But don’t lose sleep over it.
Yes, this was a common tactic before in the housing market if the buyer has a ‘subject to financing’ clause in the contract.
As the seller, you could ask for proof.
Depending on the state of the market, it may or may not be worth your time.
You can ask for anything you want, but the buyer has no obligation to give you any details. They only need to inform you they were unable to secure adequate financing so are not signing off on the condition.
The buyer does have a legal duty to act in good faith, meaning if they invoke the financing clause to back out the deal it’s because they actually applied and couldn’t get acceptable and reasonable financing. Duty to act in good faith exists regardless on how the condition is worded.
You would have to sue them in court for financial losses if you think they acted in bad faith and are just using the financing clause to back out the deal for other reasons. In court the buyers would have to show their efforts to obtain financing, and that it was reasonable to not take any financing offered to them.
Suing is a huge hassle to go through, so in majority of cases absent any actual evidence will just release the buyer and move on to re-list home again. You’d only want to consider suing if you had actual evidence of bad faith and you expected significant financial losses.
Depending on the housing market in your region, if your buyer has already asked for an extension, maybe they are working hard to get financing done, with the mortgage rules and interest rate these days, it is tough out there.
That’s why a lot of times, seller wouldn’t even consider an offer if there is an offer with condition of financing; even the price is higher; just because of this headache. Other buyers might have already moved on and seller might have been stuck with this buyer.
Good luck.
Financing can require a lot of documents and statements that take time to sort out, especially of you have to go back and forth with a potential lender trying to get approval. Even more so if people didn’t get the ball rolling with a pre-approval ahead of time and just started the process after the offer was accepted not realizing what it requires or what they’d be approved for.
Even then, that’s why there are condition dates. You might not hear anything until the date. You’re always within your right not not offer any extensions if you’d like to move on however it seems likely if they were trying to get out of the sale they would just not remove conditions and let the offer expire, not ask for extensions.
Short answer? Yes.
Long answer? Clause is generally worded to allow the most latitude for the buyer, as are all subject clauses. Technically, if you believe the buyer acted in bad faith, you could sue them for damages, but it would be a protracted and difficult suit.
Better to just have a back up offer, or take unconditional offers, or at least offers not subject to financing.
Yes buyer can simply say mortgage not approved. Not sure if it’s worth the time to get proof because buyer can apply for a mortgage or pre-approval and put false info that they know will get rejected.
“Protect yourself” by only going with no condition offers. Not sure if that is how the market is in your area tho.
Parents could refuse the down payment
If I was selling and someone had this as a condition id pass, especially if I had multiple people interested.
Potential buyers should be coming with a pre approval for an amount they are already approved for. If they aren’t doing that then I wouldn’t be able to take the seriously and id see them as a window shopper.
Who makes an offer on the condition that they’ll be loaned that money? Seems ridiculous that it’s even being entertained…
OP I wouldn’t waste my time pursuing it and just continue.
It’s no different than conditional on inspection. Inspector could say anything and the potential buyer could back out.
Thats the risk you take when you accept a conditional offer. LOL the buyer doesnt need to show you any proof.