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R/E Professionals - ? on 3rd Party Financing Addendum paragraph 2b

4,486 Views | 48 Replies | Last: 4 yr ago by Diggity
MS08
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AG
Sorry for that circumstance you find yourself in Enron.
Enjoyed reading everyone's insight and opinions.

Like third coast said, following.
EnronAg
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AG
Yes, all of the opinions and feedback have been tremendously helpful...and I greatly appreciate everyone's input.

Just real quickly getting back to my original question - have any of you real estate professionals seen paragraph 2b of the third party finance addendum (property approval) used to get out of a contract after the appraisal and buyer approval periods have lapsed? Just seems I have an EXTREMELY rare case, if not, fraudulent/unethical experience on my hands.
Bob_Ag
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AG
Just a quick question...They terminated under 2b and at the same time submitted a letter from a lawyer to return the earnest money?

Just seems really odd to involve a lawyer right off the bat, but maybe they were expecting to have to fight you.

Maybe ask your listing agent to look at their house and see if it is back on the market. I suspect their deal fell through and their lender won't approve them to carry both loans. I don't think they can terminate under that scenario and it would be considered a default.

It is a very clear part of the contract and the lender has to give you a written statement of why it was not approved.

If I were you, and I had a pretty good feeling they defaulted, then there is no chance in hell I am giving that EM back.
Diggity
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AG
The reason they're using 2B is there are no defined deadlines for that section.

Theoretically, if there is a lender related issue with the property, it can be used to terminate the contract anytime before closing.

Using the plumbing issue to get out of the contract is silly, but buyers using 2B isn't that unusual. It's just usually related to appraisal.

Again, if the title company was holding the earnest money, I think moving on would be the reasonable course of action because you would likely never see the money again (unless the buyer signed it over to you). Since you're holding the money, take Steve's advice above.
Agilaw13
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Terminating under 2B for appraisal purpose isn't rare. Attempting to terminate under 2B with your fact situation and you holding the earnest money is rare. In response to Diggity, the Buyer can't just terminate at any time before closing, there is a time provision to this section.
Diggity
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AG
The time provision for that section is "no later than 3 days before closing date", which presumably the seller continued to extend.

I was contrasting it to section 2A, where there is a defined number of days a buyer has to obtain financing.
Red Pear Realty
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AG
Quote:

Terminating under 2B for appraisal purpose isn't rare. Attempting to terminate under 2B with your fact situation and you holding the earnest money is rare.

Agreed.

Quote:

In response to Diggity, the Buyer can't just terminate at any time before closing,

Sure they can. There are just consequences for doing so, which is Diggity's point--the buyer probably had ~21 days or so to terminate per 2A, didn't meet that deadline ~80 days in, so they had an attorney friend write up a scary letter with the justification being 2B in hopes that EnronAg would blink first.
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Bob_Ag
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AG
Red Pear Realty said:

Quote:

Terminating under 2B for appraisal purpose isn't rare. Attempting to terminate under 2B with your fact situation and you holding the earnest money is rare.

Agreed.

Quote:

In response to Diggity, the Buyer can't just terminate at any time before closing,

Sure they can. There are just consequences for doing so, which is Diggity's point--the buyer probably had ~21 days or so to terminate per 2A, didn't meet that deadline ~80 days in, so they had an attorney friend write up a scary letter with the justification being 2B in hopes that EnronAg would blink first.
What Agilaw13 may mean is there is a time is of the essence clause in 2C. Buyers are supposed to secure financing and time is of the essence and in this case after 80 days, I think you could argue the buyers were not exhibiting that.
Sure buyers can terminate at any time before closing, but it's a matter of whether defaulted or not. It all depends on why the lender is pulling the financing which is what I would have made very clear ASAP.

Since there is no buyer contingency for selling their house first and IF the lender pulled financing because their house fell through (2 loans), then you might could argue that they defaulted. This is not legal advice, definitely consult with an attorney.
EnronAg
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AG
Thanks, bob...and others.

But just to clarify a point in your most recent reply, they are 100% not being denied the loan for 2 loans, credit, etc. It is specifically for "unacceptable property" with no specifics behind it. I'm going to proceed forward with trying to request a better lender denial letter with specific dates and reasons. Cuz the one I got was complete garbage IMO
Diggity
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AG
I would think the seller agreeing to extend closing several times would negate any argument there. 2B clearly says 3 days prior to closing.

You would have to prove that he knew the property didn't qualify and sat on it
Bob_Ag
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AG
It's moot at this point since securing financing isn't the reason the deal fell through. Either way, agreeing to an extension doesn't negate that buyers can delay obtaining a loan. It's the whole reason 2C exists. I do see your point, it is definitely a subjective thing.

Enron, thanks for clarifying, that's a bummer. Not sure how much recourse you have, but I would make em work for the money since you just lost 80 days.
Diggity
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AG
I guess I don't understand your point. 2a and 2b are two separate scenarios. The buyer getting financing has a deadline. The property being financeable is not subject to the same deadline.
Mas89
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AG
EnronAg said:

Thank you guys!!! Keep the feedback coming...I've been waivering on how to proceed and any input is greatly appreciated. And I agree diggity, my agent dropped the ball...but you better know that mistake ain't ever happening again on my end now that I've been through this.
I was on a jury for this type of a deal gone bad. Buyer backed out, seller kept 10k earnest money and then the house didn't sell for over a year. They sued each other and somehow the real estate company was liable also. It settled after 3 days of trail and we were not told the outcome. Huge waste of my week and I could tell the whole lawsuit was hard on those involved.

IMO, give back the EM and live and learn.
Bob_Ag
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AG
Diggity said:

I guess I don't understand your point. 2a and 2b are two separate scenarios. The buyer getting financing has a deadline. The property being financeable is not subject to the same deadline.


That's what I said above you. I thought the buyer didn't secure financing originally, not that the lender pulled the loan due to the property.
Diggity
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AG
Gotcha, I was reading your post a different way
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