Seller has few options when buyer’s ‘preapproved’ loan is canceled
I accepted an offer last month to sell my home for $249,000, in part because the buyers provided a certificate from their bank stating that they were preapproved for a loan of up to $275,000. But now the buyers have notified me that they are canceling the sale because the lender will no longer give them the mortgage that they were promised. Can I keep the buyers’ good-faith deposit and sue them for breaching the sales contract?
A. You could sue, but you probably would not win.
Smart buyers always get “preapproved” for a mortgage before they start shopping for a home. The bank typically issues a letter, certificate or card that suggests that the buyers can borrow a certain amount of money — in this case, $275,000.
If you read the fine print, though, you’ll find that the bank can cancel its preapproval for any number of reasons. Those causes can range from a below-market appraisal of the house that the buyer wants to purchase to the unexpected loss of a borrower’s job or a sudden drop in the buyer’s credit score.
Your letter doesn’t say why the lender yanked the buyers’ loan preapproval. But if the purchase offer you signed included a standard contingency stating that the buyers are not obligated to complete the transaction if they cannot get suitable financing, you have little choice but to terminate the proposed deal and return the buyers’ deposit.
Filing a lawsuit against the buyers would likely be both costly and fruitless, unless you could prove that they purposely set out to defraud you.
Your best choice would be to agree to cancel the sale, return the deposit and put your house back on the market. With sales strong and prices still rising in most parts of the nation, you shouldn’t have any trouble finding a better-qualified buyer who might even make a higher purchase offer.
REAL ESTATE TRIVIA
A record-low number of homes for sale subsequently led to a record-low sales time, according to the most recent monthly report by the National Association of Realtors. The typical home sold in just 20 days, with double-digit price gains from a year ago recorded in each region of the nation.
Q. I retired from the Army in 2019 after 16 years of service. Now my wife and I would like to refinance the VA mortgage on our home and pull some cash out to add another bathroom and make some repairs. Will the Department of Veterans Affairs guarantee a cash-out refinance loan based on the equity that we have built up since we bought the home, or will the VA only refinance the outstanding balance of our current mortgage?
A. The VA’s Cash-Out Refinance Loan program will let you refinance your house and pull some money out for just about any reason, including to make home improvements, pay off other debt or to fund a college education. The program will cover up to 100 percent of your property’s current value, rather than the price that you originally paid.
Contact some local VA-approved lenders for details. Also call the VA itself at 800-827-1000 or visit its website at va.gov.
Thank you for doing your part to ensure that we’ll celebrate another year of freedom on July 4.