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We accepted a contract for the sale of our home after the buyer's agent told is they were "pre-approved".

The day before closing we found out there was a problem with the husband's wages and that they were declined. Their agent is now trying to get them financing. In the mean time, we purchased a new home in another state, our entire house is packed up, my husband took time off work and we put a down payment on a tractor/trailer for my husband's job. We were assured these people would be approved for their loan by our agent as well as their agent. Do we have any recourse?

Public Comments

1. keep their downpayment....you can not get water from a rock. if they don't qualify, that is the end of it. perhaps their downpayment will let you price the house for a quick sell? if you have a rich family member, they could finance the house purchase for the new buyer, and if it falls through, they get the house - or you can co-finance, where they give you the downpayment for the new home, they own the old home, and make transfer payments to you (as the money comes in from the new buyer, they just hand it over to you, less their interest cut for financing.) GL - this really sucks. i feel for you..
2. You can probably get the earnest money as damages if you don't want to give them any more time to close on the property. If they can obtain financing, it might be better to stick it out with them because if you put the house back on the market it could take longer to obtain financing. You might have your listing agent refer these buyers to a lender he/she has used before that he/she trusts and get their opinion about the buyer's true ability to obtain financing. So, i would have your listing agent refer them to a lender he/she trusts, and take it from there as to whether you should stick it out with them or put it on the market and get another buyer. I've been a realtor in Texas for 8 years. If i were in your position, this would be my suggestion and it would be what i would do. If the buyer has income problems with the current lender, i don't see them getting financing with someone else. Suggest using FHA guaranteed financing. More flexible terms available. More closing costs to you, so you'll need to raise the price to account for that increased expense to you if they do indeed use FHA guaranteed financing. By the way, you wouldn't get their Down Payment. You would only be intitled to their earnest money. There is a HUGE difference between the two in most cases. Good Luck!
3. Hope they get their loan. Otherwise your recourse is to put it back on the market. But whatever money they put down for good faith you should be entitled to it. Usually it states in the ernest money contract that they have to have financing by a certain time or the deal is off. You may want to work with them and give them as much time as you can spare to get their financing so then you can move on.
4. Unfortunatly not. The contract states that if a buyer isnt approved for the loan, it is null and void. They even get their earnest money back. Your REALTOR should have gotten a copy of the pre approval letter and then followed up to be sure everything was going smoothly.
5. Hi Deb...another Deb here. I was in a similar position last year. My sisters and I were selling my aunt's house. The buyers agent said there was a pre-approval, but didn't include it with the contract. My sisters accepted the contract (I was at work) then I went to sign. I didn't want to sign until I SAW the pre-approval but I'm a wimp and let them push me around. Did I mention I'm in loan processing? I KNEW better, but did it anyway. Our agent was a friend of one sister, and she didn't want to hurt his feelings by me questioning anything. They didn't get the loan because they were lying about their income. Maybe not them, but their agent at least, and their employer who was willing to write a letter stating they earned more than they really did. The lender wanted W2, which of course they couldn't provide. They did find another lender, someone considered kind of shady in the industry, but they were approved and we did close. They buyers didn't speak English and I'm not sure they were aware of what was happening. Moral of the story: don't accept a contract unless the pre-approval is STAPLED to the front of it. Maybe they'll be able to get another loan. We got lucky, so maybe you will too.
6. A preapproval is worthless. Before we break ground on a home, we require FULL loan approval from an underwriter. Any lender that says that can't do that is full of crap. There is desk top underwriting which takes mins. Yes, there may be conditions, but we all know what they are up front and there is very little problem on the back end;
7. The only way you could get recourse, other than keeping the earnest money, would be if their agent was stupid enough not to make the sale contingent on financing and that’s not particularly likely. Most sales are contingent on financing for this reason.
8. Pre-approved means absolutely nothing! To be honest, your agent didn't do her job with making sure the buyers had a commitment letter from the bank at least a couple of weeks before closing.
9. You got good advice from most of the ones here, however the solution might lie with you. A pre-approval is a lenders word that a loan has been approved, there might be few things left but it is a good document. In this mortgage crises I have seen this happen more often than not. Do you need the money you are getting as a down payment to use on you home you are buying in another state? My suggestion is get the loan application from the current buyers you have now, look the credit report over and other documents, especially the credit report. Ask you real estate agent to tell you the formula for getting the back end ratio. If you don' trust your agent then call a mortgage broker to explain the formula for coming up with the back end ratio. Once you have done that get the buyers W-2 (No substitutes) (No Letters from employers giving imcome) Now get the federal income taxes to back up the W-2. If these two documents don't match you have someone that is attempting to fraud this transaction. If they match and you can get a backend ration of below 38% and you see that they have paid there current debts on their credit report without missing a payment, in other words no 30 day lates not a single one. If they have one let them explain it to you. Once you have those two things out of the way you might consider financing the property yourselves. Since you have established a sales price,subtract the current mortgage from the sales price. What ever this figure is now subtract the down payment, this will give you the amount of your second mortgage that you will be carrying. Now look in your telephone book and find a company that make loan docs. You will need to tell these people what you are charging as interest rate, how many years you are willing to carry this second mortgage. The amount you will be charging them for any late monthly mortgage payments. They might have other questions. Make sure you understand these questions and what they mean to you as the investor. Now add your current monthly mortgage payment to the new second mortgage monthly payment. The doc signing or escrow closing agent should be able to tell you this monthly payment based on the information you have provided to them. This is the amount they should send you each month for the two mortgages. Once you recieve the monthly mortgage payment, you should make out a check to send to the current mortgage holder which is your first mortgage. The remainder is for your second mortgage. You will also have to tell the current escrow closing officer the same information. Once the tranaction closes your title company will record a second mortgage in your name at the county court recorders office. The first mortgage will remain in place with no change or notification. The buyers will be taking title to the property "Subject To The Existing Mortgage." Closing officers and title companies understand this type of transaction. The borrowers will also have to pay the county taxes as well as pay for the fire or hazard insurance payments. This is a solution if you want to move on to your new home and not put up with renters as well as sell your old home. You will have a second mortgage, move into your new home in your new state. This is not without any problems, so you have to consider this carefully. If the borrower's fail to make their monthly mortgage you may place the house in foreclosure and get them out. While they are not paying you and the house is in foreclosure you will have to make the first mortgage payment. If they bring the mortgage current they have to make up any back payments to include your late fee that was in your loan docs. They will also have to pay for any foreclosure fees you had to pay to start the foreclosure and any late fees imposed by the first mortgage. I hope this has been of some use to you, good luck. "FIGHT ON"