Sorry for your troubles. You asked: We're in a pickle now. Is the contract dead, and do we have an obligation to continue moving forward to close?
A: Most real estate purchase agreements contain a financing contingency, which permits the buyer to cancel the transaction if the financing is not confirmed by a lender by some date certain before closing. If you had a real estate agent representing you in the negotiations and you were not strongly advised to have this provision in the contract, then you may have a malpractice action against the agent. If you did not have an agent, then you may have no financing contingency, and that could expose you to liability if you cannot produce the necessary cash to close the transaction. Do we need to comply with the seller's conditions to extend?
A: The contract provisions control. Usually, you're required to move forward, and if you don't the seller may have an action for damages against you, which may be the amount actually provable at trial, or based upon a "liquidated damages" clause in the contract which states the exact amount of damages that will be due if the contract is not completed as agreed. In practice, however, when a real estate market is rising, the seller is never damaged, because he/she can always sell the property for more to someone else. Consequently, buyers are rarely liable for damages. Unless your contract expressly requires you to pay for the seller's expenses due to his not being a resident of Florida, then this would not be ordered against you by a court. You're not responsible for the seller's cost of living. Should we put more money down on a property which the lender has not made a commitment to provide a loan on?
A: I wouldn't put another penny into escrow -- nor would I release any monies. I would offer to either cancel the transaction, and receive the entire deposit back, less any actual costs incurred by the closing attorney, or I would offer to try to find another lender. The seller can actually put the property back on the market and try to sell to someone else. Ultimately, were that to happen, you would have to sue to get your money back from the closing attorney -- but you probably would get it all back, less the attorney's costs, because the seller would sell the property, get his profit, and have no damages. Are we really responsible for the pro-rated costs like HOA dues and taxes, etc?
A: No. You're not the owner, yet. It's possible that a court could hold you responsible for these fees, but without legal action and a court order, you're not liable. And, if you are sued, then you could sue the lender for the unreasonable delay in underwriting the loan, and thereby tie the entire transaction up for a very long time (because banks rarely settle, and they have unlimited financial resources with which to defend lawsuits against them). Moreover, do we need legal representation and the added expense of that entails (which we really cannot afford)?
A: If your contract has a mediation or arbitration
provision, you could start along that course -- or, if not, then you could offer to mediate or arbitrate. This would reduce your legal expenses -- but, you definitely need a lawyer for any of this. Ideally, if you can get a retired judge to mediate and tell you and the seller what is likely to occur if the matter continues unresolved, you will probably be able to reach a settlement of the matter. The seller is desperate to "get out of town," so if it feels as though things may be bogged down in litigation
, the seller may be willing to cooperate. But, you need a plan that will actually show you can get funding. In my view, this probably means a different lender, and it may require a higher interest rate in order to mitigate the lender's risk as a means of getting underwriting more quickly.
Please let me know if I can be of further assistance.