Enforcing a contract after earnest money is released

[jpg2003]

What is the name of your state? NC

My husband and I recently (April 15 2005) entered into a contract to purchase a home. It provided a financing contingency that required us to obtain a loan commitment letter by the 28th of April or the Seller could terminiate the contract. Our financing was denied on the 2nd of May. We signed a termination of contract agreement and received our earnest money back about a week later (The seller's real estate agency held it in escrow). Now we have discovered that the ex-wife of the seller did not sign the termination of contract and wants us to apply for another loan and is threatening to sue for damages and specific performance. Does she have any legal grounds? How can we be forced to purchase a propterty that we can't obtain financing for? I thought the deal was over when our financing was denied and our money was returned.

[BradleyS]

What does the purchase contract state in writing about mortgage denial?

[jpg2003]

The Contracst states that "In the event: (1) this offer is not accepted: or (2) any of the contitions here to are not satisfied, then all eanest monies shall be returned to Buyer."

Under Conditions it states
"Buyer must be able to obtain a Conventional loan at a fixed rate in the amount of $------for a term of 30 years at an initial interst rate not to exceed 6.5%. Buyer shall apply for said loan with in 14 days of the effective date of this contract. Buyer shall use buyer's best efforts to secure the lender's customary laon commitment letter on or before 28 April 2005 and to satisfy all terms and conditions of the loan commitment letter. If Buyer fails to provide Seller a copy of the loan commitment letter or a written waiver of this loan condition within five days of receipt of Seller's request, Seller may terminate this contract by written notice to Buyer at any time thereafter, privided seller has not then received a copy of the letter or the waiver.

This is the only part of the contract that discusses the mortgage. It is a standard offer to purchase and contract STANDARD FORM 2-T. The effective date of the contract was April 18th

[BradleyS]

I didn't see any language like "if buyer is denied loan, buyer must immediately notify seller in writing with a copy of the mortgage company's denial form."

But if you could not deliver a loan committment before the 28th of April, the seller has the "option????" to cancel contract.

I don't like how the clause is written. It is definitely written for the Seller. According to the contract**************you still have to purchase the house even without obtaining a loan......unless the seller "options" to cancel the contract.

But if it went to court, I don't think any judge or jury, using common sense, could decide against you.

If you already received the earnest/deposit money back the contract had to be null and void. There is usually only 3 ways to get earnest/deposit money back.....

1. The transaction has to close.
2. A court order has been issued by a judge.
3. The buyer and seller listed on the contract must agree to release the funds.

Your purchase contract should have this in writing.

North Carolina link on earnest money.....

[url]http://www.ncrec.state.nc.us/pdf/LicensingBooklet/guide.pdf[/url]

VI. DISBURSING TRUST MONEY


Read this and post back.....

[jpg2003]

After reading the link that you provided, I can't imagine how we ever got our money back if she didn't agree to it. Unless the escrow made a mistake? If so that isn't my fault. "Common sense" tells me that it is impossible to purchase a home if you can't qualify for a loan.

[BradleyS]

Originally Posted by jpg2003

After reading the link that you provided, I can't imagine how we ever got our money back if she didn't agree to it. Unless the escrow made a mistake? If so that isn't my fault. "Common sense" tells me that it is impossible to purchase a home if you can't qualify for a loan.

The Seller needs to blame the Brokerage**************.not you. The Brokerage may have violated a VERY important LAW and could face possible fines and criminal charges.

Print out the file....give it to the Seller**************tell the Seller she is barking up the wrong tree. Your done.....

[jpg2003]

Thanks for all of your input. I'm going to contact a local lawyer just in case I'm missing something. Hopefully she is just blowing off steam and will lay off when she realizes that it is futile.

[JETX]

Originally Posted by jpg2003

Now we have discovered that the ex-wife of the seller did not sign the termination of contract and wants us to apply for another loan and is threatening to sue for damages and specific performance. Does she have any legal grounds?

Contrary to other 'opinions'.... the answer to your question is:
Based solely on your post, no. The contract clearly had a contingency that was not met. Provide her with a copy of the denial and tell her to kiss your '**************'.

How can we be forced to purchase a propterty that we can't obtain financing for?

You can't.

I thought the deal was over when our financing was denied and our money was returned.

It was. However, you should have gotten a signed 'termination of contract' signed by all parties. Sounds like your agent screwed up. What does he/she say about the threat of litigation??

[jpg2003]

Our agent told us that it was terminated as long as our earnest money was returned and one of the parties signed. When we approached her over the litigation she acted shocked and is now very difficult to get in touch with.

[HomeGuru]

Originally Posted by jpg2003

Our agent told us that it was terminated as long as our earnest money was returned and one of the parties signed. When we approached her over the litigation she acted shocked and is now very difficult to get in touch with.

**A: maybe she realized that she did not know what she was talking about.

[BradleyS]

"Contrary to other 'opinions'.... the answer to your question is:
Based solely on your post, no. The contract clearly had a contingency that was not met."

Although the contingency was not met, the contract reads

"If Buyer fails to provide Seller a copy of the loan commitment letter or a written waiver of this loan condition within five days of receipt of Seller's request, Seller may terminate this contract by written notice to Buyer at any time thereafter, privided seller has not then received a copy of the letter or the waiver."

Explain....."Seller may terminate..." MAY...MAY...MAY???????

It's the Seller's choice to extend the contigency, cancel the contract, until a commitment has been received**************...

According to the contract language provided......the Buyer does not have a choice to cancel the contract with a letter of denial from the mortgage company.

**************....No disrespect.....but....

Lawyer's write these purchase agreements**************..without enough experience in Real Estate Transactions**************.there are too many variable to design off a flow chart.

I sure would like to get our "Board Office" Attorney off "GOD MODE" and let the attorney see what actually happens in the "real world." Then the attorney can write a contract that meets the needs of the Licensee's, Brokers, Principals, and of course the requirement of the Real Estate Law of the State.

Any suggestions????

[JETX]

Originally Posted by BradleyS

According to the contract language provided......the Buyer does not have a choice to cancel the contract with a letter of denial from the mortgage company.

Oh, Christ, another idiot who claims to be a real estate idiot!!

Of course, the option to extend on no financing rests with the seller. And yes, the seller can do as you claim..... simple extend the contract until the buyer qualifies for a mortgage. BUT.... there is NO obligation for the buyer to even apply for a mortgage again..... or again..... or again.
Bottom line.... the seller can remain 'in contract' forever..... and never sell the house. Or can simply 'smell the coffee', cancel the contract, refund the money and move on to another buyer.

Or will you wave the 'real estate godmother' wand and make the entire transaction happen to the satisfaction of all. There are LOTS of stories on this forum where these 'wannabe' real estate agents screw up or, as in this case, spout error-filled drivel.

[jpg2003]

I did meet with a local attorney over the matter. He did say that the contract was technically still valid but under the given circumstances it wasn’t possible to enforce it. Here was his advice.
"Your mortgage was denied. You have your earnest money back. Let her be ticked off there’s not much she can actually do."

[BradleyS]

"Agreements must be kept"

[JETX]

Originally Posted by BradleyS

"Agreements must be kept"

Then you need to use the correct Latin.... consensio

'Pactus' is betrothed. agreed-upon or stipulated