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BAH, Buyers Denied Financing 7 Days Before Closing


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I knew it was too good to be true. We got an offer 7 days after we put our house on the market. They looked at the house several times, we got email after email saying it was all going well, including the bank paper work. They came one last time and looked two nights ago. Again we were told all was going well and the closing date was set for Aug 24th. We have packed up, rented a storage unit and basically prepped to move everything except our large furniture. Last night we got an email saying they were terminating the contract due to being denied their loan. They were pre-qualified so I am not really sure what happened. It is just such a blow. We are already up and down about selling this house and when we had finally come to terms...On top of that we had to go out to eat every time they came because they always came at dinner so we spent a good $200 eating out over two weeks. To make it even better, we took the house off the active status during the prime selling time (people wanting to move before school starts) so we lost that time. It is all just a big disappointment.

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I'm so so sorry!

 

We actually closed on a house once- packed and moved in THREE days' notice into my dad's house.

 

AFTER closing, we found out the buyer had falsified papers and the house went from sold and closed to unsold. :( It was devastating!

 

It sold 6 months later. We were in the process of moving overseas at the time and we'd already turned off electricity to go to the new people and removed enough appliances that there was no way we could just move back in- we just had to live at my dad's house for several months until we moved overseas.

 

I won't lie, it sucked.

 

I'm so sorry!!

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We are waiting on them to send proof that they were denied. We actually have a feeling they just decided to back out and hoped that we would sign the termination without checking. We need the earnest money to cover our expenses so we are refusing to sign until we have proof.

 

What was weird was that just the night before they had said everything was moving along fine. I just don't know why that would have all of a sudden changed. Anyways, all we can do right now is wait to see if they were really denied the financing or if they just changed their minds.

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We are waiting on them to send proof that they were denied. We actually have a feeling they just decided to back out and hoped that we would sign the termination without checking. We need the earnest money to cover our expenses so we are refusing to sign until we have proof.

 

What was weird was that just the night before they had said everything was moving along fine. I just don't know why that would have all of a sudden changed. Anyways, all we can do right now is wait to see if they were really denied the financing or if they just changed their minds.

 

 

Unless your contract demands that you release the earnest money, I wouldn't do that this close to an established closing because in order to have a closing on the 24th, the loan would have had to be at the underwriters and the title company having cleared the title. Someone has to pay for that title company work. In my experience, when a closing is established it is because the loan was approved. Therefore, they've been telling untruths to you or they did something such as run up a credit card, apply for a car loan, etc. something that tanked their credit rating or put them over their approved debt ratio, or worse. Normally, if you mind your p's and q's, a closing in six days means approval and just waiting for the reams of paperwork that has to be printed and signed by nine million people (possibly a slight exaggeration). You can't have an established closing without the title company doing their end of the work and reporting back and if there was a problem with the title, you would have been notified on your end. Something isn't kosher.

 

I'm afraid you could be stuck paying for the title work. So, if you can possibly help it, do not refund the earnest money.

 

Faith

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:grouphug::grouphug:Totally stinks. I wouldn't presume that the potential buyers did anything wrong. When we bought last year, we were pre-approved months before we had made an offer on the house (and they provided an up-to-date-pre-approval letter specific to the offer) but the loan provider didn't approve the loan until 2 days before we were due to close. They kept asking for more documentation up until the day they approved; it was a huge headache. We had to close a day late because the title company couldn't get the work done in time. At least here in CA, it isn't all that uncommon. A realtor friend missed an annual bonus b/c a house that was supposed to close on 12/15 didn't end up closing until the end of January because the bank held up the approval.

 

As far as the earnest money goes, if they hadn't waived the financing contingency, you are probably out of luck.

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Unless your contract demands that you release the earnest money, I wouldn't do that this close to an established closing because in order to have a closing on the 24th, the loan would have had to be at the underwriters and the title company having cleared the title. Someone has to pay for that title company work. In my experience, when a closing is established it is because the loan was approved. Therefore, they've been telling untruths to you or they did something such as run up a credit card, apply for a car loan, etc. something that tanked their credit rating or put them over their approved debt ratio, or worse. Normally, if you mind your p's and q's, a closing in six days means approval and just waiting for the reams of paperwork that has to be printed and signed by nine million people (possibly a slight exaggeration). You can't have an established closing without the title company doing their end of the work and reporting back and if there was a problem with the title, you would have been notified on your end. Something isn't kosher.

 

I'm afraid you could be stuck paying for the title work. So, if you can possibly help it, do not refund the earnest money.

 

Faith

 

In VA and TN, the title company won't do the title search until loan commitment is delivered or imminent. The buyer is responsible for paying for title work. When the contract is signed a projected/desired closing date is specified in the contract. So having a closing date is not indicative of having loan commitment. These days lenders are not giving loan commitment until the very last minute. They will run a credit report even within 24 hours of closing. Everything can look fine one day and the next everything falls apart. It is not necessarily a case of the buyer lying. Finally, as long as there is a financing contingency in the contract and the buyer pursued their financing with due diligence, the earnest money goes back to the buyer. Of course, laws vary state by state.

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What was weird was that just the night before they had said everything was moving along fine. I just don't know why that would have all of a sudden changed.

 

Did they personally tell you this, or was this conveyed by their realtor? We've bought and sold several houses, and the lies that we've caught realtors in have been eye-opening. (Makes us wonder about the lies we haven't caught.)

 

When we bought this house, we were on hold, waiting to get a signed lease for our old house. The sellers' realtor knew this, knew we would not close on our closing date. He did not tell his clients, and when we were at the new house for an inspection, he intercepted the seller so she couldn't hear from us that the closing wasn't going to happen as planned. They were very upset when he finally told them a few days later. :glare:

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Did they personally tell you this, or was this conveyed by their realtor? We've bought and sold several houses, and the lies that we've caught realtors in have been eye-opening. (Makes us wonder about the lies we haven't caught.)

 

When we bought this house, we were on hold, waiting to get a signed lease for our old house. The sellers' realtor knew this, knew we would not close on our closing date. He did not tell his clients, and when we were at the new house for an inspection, he intercepted the seller so she couldn't hear from us that the closing wasn't going to happen as planned. They were very upset when he finally told them a few days later. :glare:

 

The loan officer actually emailed us. We are just going to not sign the release of earnest money until we are legally obligated to, which is at the very least contingent on them providing proof of having their loan denied. Our realtor has been awesome with helping us so far so we will trust their guidance on what to do.

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When we bought our house the loan officer told us a sad story about a woman who had been pre approved, was ready to close on her new home, and then her mother died. She charged $1000 on a credit card to go to the funeral. When the loan company ran a final credit check the day before the closing, they refused to finalize the loan due to the new debt. She had to back out of the house until they could find a new mortgage company to finance her. Our loan officer told us to pay cash, pay on time, and lower anything we could until after the closing or it could happen to us as well.

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Apparently our buyers are un-backing out

 

 

I apologize for the roller coaster ride but the lender was able to approve my clients after all...

 

Is it too late to pick up where we left off?

 

We are still prepared to close on the 24th.

Regards,

 

 

I am of course happy for this news but it makes me say :glare: :001_huh:over whether they were ever actually denied. Now we have a whopping 4 days to get out of the house. If we weren't just ready to have this done with we would insist that they extend the closing date out a bit. At this point though, we just want to get their names on the paper.

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In VA and TN, the title company won't do the title search until loan commitment is delivered or imminent. The buyer is responsible for paying for title work. When the contract is signed a projected/desired closing date is specified in the contract. So having a closing date is not indicative of having loan commitment. These days lenders are not giving loan commitment until the very last minute. They will run a credit report even within 24 hours of closing. Everything can look fine one day and the next everything falls apart. It is not necessarily a case of the buyer lying. Finally, as long as there is a financing contingency in the contract and the buyer pursued their financing with due diligence, the earnest money goes back to the buyer. Of course, laws vary state by state.

 

Our financing contingency for this house only went for a certain number of days. If the loan was not approved beyond that, we would have lost our earnest money. Look at your contract and see what it says.

 

ETA: Under financing contingency, ours said: "If Buyer cannot obtain Credit Approval, Buy may give written notice to Seller within 21 days after the effective date of this Contract and this contract will terminate and the earnest money will be returned to Buyer. If Buyer does not give such notice within the time specified, this contract will no longer be subject to Credit Approval. Time is of the essence for this paragraph and strict compliance with the time for performance is required"

 

So if we'd had a last minute failure of the loan, our earnest money would still be forfeit.

Edited by vonfirmath
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:grouphug::grouphug:Totally stinks. I wouldn't presume that the potential buyers did anything wrong. When we bought last year, we were pre-approved months before we had made an offer on the house (and they provided an up-to-date-pre-approval letter specific to the offer) but the loan provider didn't approve the loan until 2 days before we were due to close. They kept asking for more documentation up until the day they approved; it was a huge headache. We had to close a day late because the title company couldn't get the work done in time. At least here in CA, it isn't all that uncommon. A realtor friend missed an annual bonus b/c a house that was supposed to close on 12/15 didn't end up closing until the end of January because the bank held up the approval.

 

:iagree::iagree::iagree:

I have heard a BUNCH of horror stories recently about how difficult it is to get mortgages and re-fi's approved today. Somebody we know got denied a refi because despite having excellent credit, significant equity in the house, and a base income more than sufficient to pay the mortgage, his 2011 total income was slightly lower than his 2010 income due to a smaller year-end bonus. ANY decrease in income apparently was enough to scare off the lender, even if the bonus wasn't even needed to afford the mortgage. :glare:

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I don't think being pre-qualified means anything anymore.

 

I'm dreading selling our old house. We have already moved to our new house, but haven't yet emptied the old house. Plus, we need to do repairs. But nothing with banks is guaranteed anymore -- they don't say what they mean.

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