Contract in jeopardy due to incorrect loan info.
We've had a contract on our home for one month and we are two weeks from closing on the one we are selling and the one we are buying (both closing on same day). We've just learned that our buyers were inadvertently told that they were in good standing and could close on Aug. 29 (they have forclosed and bankrupted previously). Now it looks like the contract might fall through...their lenders are sending info. to underwriters. In the meantime, there's been an inspection, our son is changing schools, we have a storage unit in our garage with half our house in it and we have paid over $3,000 towards payment of our new house. Has someone violated contract law...such as the lender who gave the buyers the pre-approval?
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I have leaned while investing and selling in real estate that pre-approvals don't mean S---! I never trust a closing date because anything can happen before that time. We have had many closings fall through, one on the day before. You really unfortunately have no recourse. I feel so sorry for you, it must be a lot of stress on everyone. Just proceed with your move to your new house, you have to, or you will lose your deposit, and put those sellers in the same position you are in. We have a closing on one of our properties this Friday, but it is NEVER a for sure thing, until all the papers are signed the keys are given to the new owners, and you are walking out of the closing. It will probably be very hard for you to pay 2 mortgages if your current house doesn't sell.
If it's possible, I highly recommend you seek legal advice by a competent professional because the stakes are too high not to. Anything I say is just a personal opinion with no legal background whatsoever. My personal opinion is that the original lenders failed to do due diligence, like title searching or a background check, and there should be a clause or point in your legal agreement that prevents this. This is mis leading and is causing you substantial and material damage, not to mention the stress and personal issues you are facing. There's the possibility the original buyers mis stated information in their application also. The fault is with the lenders. I recommend trying to get the President or Manager or someone very influential on the phone personally and to possibly threaten federal investigation on the lender,w which should wake someone up.
Pre-approval means that “We think we can give you a loan based on what we know right now.” However, things come up during the loan review/underwriting process that can change that. Neither the lender or buyer did anything wrong. This is not an uncommon event.
It sounds like the lender didn't know what they are doing. It sounds like the buyer doesn't qualify.
If I had been the seller (or your agent) and I knew about the bad credit history, I would have DEMANDED that the buyer give me a full loan commitment that was actually approved by underwriting.
I'm betting that they gave a prequal or preapproval letter, NOT a full loan commitment.
There isn't much you can do. I hope that you have a large deposit.
Nope. This is what happens when you try to time things to work perfectly smoothly. You should have separated the two closings by a week or so.
"Pre-approval" means nothing. They always must get final approval just before closing. Your bank is doing the same to you.
You could be stuck if you didn't have a contingency clause in your offer that allowed for your sale to fall through.
nope
The contract always always for contingencies and any loan contract says nothing is guarenteed until funding is complete.
pre-approval from a lender means very very little
Get a lawyer. Talk to your bank.