Sellers have few choices when a buyer’s loan is de­nied

The Palm Beach Post - Residences - - Front Page - David W. My­ers

Ques­tion: We ac­cepted an of­fer to sell our home in Jan­uary for $210,000. The buyer had a cer­tifi­cate from a bank that said he was qual­i­fied to bor­row up to $220,000. Last week, the buyer no­ti­fied us that he is can­cel­ing the sale be­cause the bank will no longer give him the loan. Can we sue the buyer or bank?

An­swer: You could sue both the buyer and the bank for mis­rep­re­sen­ta­tion or any­thing else you wish, but you prob­a­bly would not win.

Savvy buy­ers al­ways get preap­proved for a loan. The len­der they choose typ­i­cally is­sues a let­ter, cer­tifi­cate or card that says they’re able to bor­row a cer­tain amount of money — in this case, $220,000.

If you read the fine print, how­ever, you’ll see that most preap­proval doc­u­ments or cards specif­i­cally state that the len­der is not ob­li­gated to is­sue a mort­gage for the stated amount. Banks can can­cel a preap­proved mort­gage for any num­ber of rea­sons, rang­ing from a below-mar­ket appraisal to even the most mod­est of down­grades to the loan ap­pli­cant’s credit rat­ing.

Your let­ter doesn’t state why the bank sud­denly yanked the buyer’s loan ap­proval. But as­sum­ing that the pur­chase of­fer you ac­cepted in­cludes a stan­dard con­tin­gency stat­ing that the buyer isn’t ob­li­gated to com­plete the trans­ac­tion if he can’t get suit­able fi­nanc­ing, you have lit­tle choice but to ter­mi­nate the deal and re­turn his de­posit.

Fil­ing a law­suit against the buyer likely would be fruit­less, un­less you could show that he pur­posely set out to de­fraud ei­ther you or the bank. Fil­ing suit against the len­der would be an even big­ger long­shot bet, for its highly paid lawyers would surely be able to prove that the bank had a good rea­son to can­cel the ap­pli­cant’s ear­lier loan ap­proval and there­fore can­not be held li­able for the home sale that fell apart.

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