cancelation of purchase agreement, can they back out?

[mblatour]

What is the name of your state? Minnesota
On Feb. 10th my husband and I signed a purchase agreement to sell our home. The prospective buyers had a letter of pre-approval from their lender and all looked good. We took our home off the market and began the process of closing with the date scheduled for March 21st. On Feb. 11th we were present with our realtor while he called the buyer's lender to confirm that indeed they were approved for this transaction. They were. From that point on all of the necessary steps were taken. The buyers ordered a home inspection and the house passed with flying colors. The appraisal was given and appraised for the selling price. Then suddenly on March 21st at 2:30 we received a call from our realtor stating that the 4:00 closing was cancelled and we had to wait for an answer of what the lenders problem was. We found out the final details today (the 27th) when we receieved a letter of denile from their lender. I guess the female spouse (buyer) was going to be quitting her job to move to our town and buy this home. Their lender stated the reason for the denile to be that they were unable to verify employment for her, and the husband's income was not enough. This is something that we strongly believe should have been discovered during the pre-approval process. You can't get pre-approved for a loan until they verify income and see your paystubs, it's very basic.

We were also told today that the buyer's were to receive their $1,000.00 in earnest money back because the lender denied their financing. We had to put our lives on hold for over 6 weeks and now we walk away with nothing. We are stuck with 2 places to pay for and are unable to afford. We are unable to follow through with our construction loan to build our new home until this house is SOLD. We now have to try and resell this home with a war in progress and higher interest rates than previously. Someone must be held accountable for this. We followed all of the proper steps to selling our home and they "bailed" on us. We walk away with more debt. Please tell me if there is something we can do to make this bad situation a little better. Thank you.

 

[HomeGuru]

What is the name of your state? Minnesota
On Feb. 10th my husband and I signed a purchase agreement to sell our home. The prospective buyers had a letter of pre-approval from their lender and all looked good. We took our home off the market and began the process of closing with the date scheduled for March 21st.

**A: wrong move. You and your Realtor were wrong in prematurely taking the property off the market.
***********
On Feb. 11th we were present with our realtor while he called the buyer's lender to confirm that indeed they were approved for this transaction. They were. From that point on all of the necessary steps were taken. The buyers ordered a home inspection and the house passed with flying colors. The appraisal was given and appraised for the selling price. Then suddenly on March 21st at 2:30 we received a call from our realtor stating that the 4:00 closing was cancelled and we had to wait for an answer of what the lenders problem was. We found out the final details today (the 27th) when we receieved a letter of denile from their lender. I guess the female spouse (buyer) was going to be quitting her job to move to our town and buy this home. Their lender stated the reason for the denile to be that they were unable to verify employment for her, and the husband's income was not enough. This is something that we strongly believe should have been discovered during the pre-approval process. You can't get pre-approved for a loan until they verify income and see your paystubs, it's very basic.

**A: verification of income is easy to prove but that is not the reason for the denial. And your agent should have explained what a pre-approval letter is.
*********
We were also told today that the buyer's were to receive their $1,000.00 in earnest money back because the lender denied their financing. We had to put our lives on hold for over 6 weeks and now we walk away with nothing. We are stuck with 2 places to pay for and are unable to afford. We are unable to follow through with our construction loan to build our new home until this house is SOLD. We now have to try and resell this home with a war in progress and higher interest rates than previously. Someone must be held accountable for this. We followed all of the proper steps to selling our home and they "bailed" on us. We walk away with more debt. Please tell me if there is something we can do to make this bad situation a little better. Thank you.

**A: your contract contained a financing contingency which was not met, therefore the Buyer's have a right to their earnest money back. What did your Realtor tell you about all of this?

 

[Souix]

HG:

Some multiple listing services require the listing agent to mark the listig sale pending within so many days of signing the sales agreement. However, it probably would have been wise for the listing agent to publish that backup offers would still be considered until such time as full loan committment was tendered.

 

[HomeGuru]

HG:

Some multiple listing services require the listing agent to mark the listig sale pending within so many days of signing the sales agreement.

**A: yes, so what's your point? There is a huge difference between marking the MLS listing as pending and the listing broker and Seller taking the property off the market. Even if an offer was accepted, the property could still be marketed up to the date of closing. It was incompetent of the agent to stop all marketing efforts just because of one offer and a pre-approval letter.
********
However, it probably would have been wise for the listing agent to publish that backup offers would still be considered until such time as full loan committment was tendered.

**A: now you're talking and I would even go so far as to accept back-up offers and to continue open houses and showings and with other forms of marketing.

 

[Souix]

HG:

Some multiple listing services require the listing agent to mark the listig sale pending within so many days of signing the sales agreement.

**A: yes, so what's your point?

*****My point is that when you say "off the market" to me that means removing it from Active Status in MLS. I just wanted everyone to know that we Realtors are forced to report our listings Sale Pending within a few days after signing the Purchase Agreement otherwise we can be fined considerably. Since advertising and Open Houses are basically ineffective, word of mouth would be the best way to keep marketing the property.*****


There is a huge difference between marking the MLS listing as pending and the listing broker and Seller taking the property off the market. Even if an offer was accepted, the property could still be marketed up to the date of closing. It was incompetent of the agent to stop all marketing efforts just because of one offer and a pre-approval letter.
********
However, it probably would have been wise for the listing agent to publish that backup offers would still be considered until such time as full loan committment was tendered.

**A: now you're talking and I would even go so far as to accept back-up offers and to continue open houses and showings and with other forms of marketing.

 

[mblatour]

Hi,
Thanks for your replies. The only knowledge of this house selling process we have is that when the property for sale has an accepted offer and signed purchase agreement, the property is no longer for sale because you are IN CONTRACT with the potential buyers. If this is not the case, please correct me. The day after we had the signed purchase agreement, our realtor put a SOLD sign up in our yard and we took it as SOLD. I now see while people put up SALE PENDING signs instead. We had no warning, no knowledge of any problems with the sale. I spoke with the potential buyers mortgage lender on Friday and she informed me that they denied the loan because the wife of the couple quit her job in order to move to our town to buy the house, therefore they could not verify employment for her. When the pre-approval was originally done, she had a job. I questioned their lender on why they did not see that she would have to terminate employment in order to move 3 hours to our town, and the lady told me that it was a mishap in communication. She also told me that they offered alternative means to secure the loan (a co-signer?), but the buyers turned it down. That meaning to me that they backed out of the deal even with options, therefore that should forfeit the earnest money to the sellers?? If they truely wanted to buy the house, the wife would have held onto her job until after the closing, because she obviously knew that they would have to move, and why cause any prob's with the bank? Who is at fault, who can we hold accountable for this? Thank you.

 

[Souix]

Hi,
Thanks for your replies. The only knowledge of this house selling process we have is that when the property for sale has an accepted offer and signed purchase agreement, the property is no longer for sale because you are IN CONTRACT with the potential buyers.


***This is true with the multiple listing service only. As stated above, MLS will fine a Realtor for not reporting a sale pending within so many days of a mutually accepted offer.***



If this is not the case, please correct me. The day after we had the signed purchase agreement, our realtor put a SOLD sign up in our yard and we took it as SOLD.


***It was wrong of your agent to put a SOLD sign up without full loan committment. I usually don't even put a SALE PENDING sign up until after everyone signs in closing. When it records - thats when I put the SOLD sign up, because that is the only time it is ever SOLD.***


I now see while people put up SALE PENDING signs instead. We had no warning, no knowledge of any problems with the sale. I spoke with the potential buyers mortgage lender on Friday and she informed me that they denied the loan because the wife of the couple quit her job in order to move to our town to buy the house, therefore they could not verify employment for her. When the pre-approval was originally done, she had a job. I questioned their lender on why they did not see that she would have to terminate employment in order to move 3 hours to our town, and the lady told me that it was a mishap in communication. She also told me that they offered alternative means to secure the loan (a co-signer?), but the buyers turned it down. That meaning to me that they backed out of the deal even with options, therefore that should forfeit the earnest money to the sellers?? If they truely wanted to buy the house, the wife would have held onto her job until after the closing, because she obviously knew that they would have to move, and why cause any prob's with the bank? Who is at fault, who can we hold accountable for this? Thank you.

***What you need is something in writing from the buyers explaining why they cancelled. Since we don't know the true reason why they cancelled it would be better to hear it from them. To say that they turned down a co-signer is premature because we don't know if they were able to get someone to co-sign. We also don't know the full situation with her employer and if she did quit or if she was fired. I believe it should state in your contract that the buyer must give you notice in writing, but I'm unsure of that too because I don't know what your forms say. So once this gets hashed out between the two of you, it will be clearer for you to see who gets what. Don't forget, the buyers did pay for the inspection and the appraisal, so by not getting the house they are out quite a bit of money too.***

 

[HomeGuru]

Hi,
Thanks for your replies. The only knowledge of this house selling process we have is that when the property for sale has an accepted offer and signed purchase agreement, the property is no longer for sale because you are IN CONTRACT with the potential buyers.

**A: totally incorrect. In contract does not mean sold. Sold means the property has closed and recorded.
**********

If this is not the case, please correct me. The day after we had the signed purchase agreement, our realtor put a SOLD sign up in our yard and we took it as SOLD. I now see while people put up SALE PENDING signs instead.

**A: see above. The Realtor was totally wrong and unethical.
************


We had no warning, no knowledge of any problems with the sale. I spoke with the potential buyers mortgage lender on Friday and she informed me that they denied the loan because the wife of the couple quit her job in order to move to our town to buy the house, therefore they could not verify employment for her. When the pre-approval was originally done, she had a job. I questioned their lender on why they did not see that she would have to terminate employment in order to move 3 hours to our town, and the lady told me that it was a mishap in communication. She also told me that they offered alternative means to secure the loan (a co-signer?), but the buyers turned it down. That meaning to me that they backed out of the deal even with options, therefore that should forfeit the earnest money to the sellers??

**A: it depends on how your contract was written.
*********


If they truely wanted to buy the house, the wife would have held onto her job until after the closing, because she obviously knew that they would have to move, and why cause any prob's with the bank? Who is at fault, who can we hold accountable for this? Thank you.

**A: have an attorney review your contract.

 

[HomeGuru]

Souix, this thread did not address MLS and you have decided to bring up this subject where there was no discussion on the subject. The MLS requirements have nothing to do with a Realtor or Buyer taking the property off the market. These are 2 separate and distinct actions.

 

[Souix]

Souix, this thread did not address MLS and you have decided to bring up this subject where there was no discussion on the subject. The MLS requirements have nothing to do with a Realtor or Buyer taking the property off the market. These are 2 separate and distinct actions.

**Well Mr. Guru, if a property is listed with a realtor, then it is listed on the MLS. This is the benefit of listing with a realtor. To put a sign up is just another marketing technique. To take it off the market it needs to be marked "pending" and "sale pending" on the sign. Thats why I brought this up, because you stated previously that the realtor should never have taken it off the market. You will notice that I agreed with you that the SOLD sign should never have been put up until after recording. **

 

[HomeGuru]

**Well Mr. Guru, if a property is listed with a realtor, then it is listed on the MLS.

**A: not in all instances. The brokerage listing agreement and MLS listing are 2 different contracts. It is entirely possible for a property to be listed with a broker and not in MLS. The brokerage companies do not own MLS, as MLS is a service provider and not a brokerage firm. I know of many properties listed with brokerage firms but ARE NOT listed with MLS. For example; new homes sold by a developer builder, homes listed where the brokerage firm is not an MLS subscriber, home listed where the brokerage firm is not a Realtor member etc.
**********



This is the benefit of listing with a realtor. To put a sign up is just another marketing technique. To take it off the market it needs to be marked "pending" and "sale pending" on the sign. Thats why I brought this up, because you stated previously that the realtor should never have taken it off the market. You will notice that I agreed with you that the SOLD sign should never have been put up until after recording.

**A: I agree here, but in the above you did not have your facts straight.

 

[Souix]

Ok I see your point. But the reason why I incorprated MLS into this thread is that it is a viable part of marketing the property, and I just want the writer to know, if their home was listed in MLS that it would need to be marked sale pending within a certain time period after mutual acceptance of an offer. So the only other viable way to continue marketing the property would be word of mouth between realtors and to not put a SOLD sign up.

 

[annefan]

Ha, in Bucks County Pennsylvania, if we were to wait until "recordation" of the conveyance of title with the court house, we'd be posting SOLD signs on properties two to six months AFTER the new owners take possession. Our Recorder of Deeds is turtle-esque.

 

[Souix]

Ha, in Bucks County Pennsylvania, if we were to wait until "recordation" of the conveyance of title with the court house, we'd be posting SOLD signs on properties two to six months AFTER the new owners take possession. Our Recorder of Deeds is turtle-esque.

So you're giving buyers early possession?

 

[BrokerRE]

Sioux has a valid point.

If I have a buyer, and in the MLS a property is marked as having a pending sale, I will not let my buyer know about this property until such time as it is changed to active and available.

Too many times I wasted my time showing buyers houses that have pending sales on them, and of course, "They love it". The rest is easy to guess, the sale goes through, they are discouraged, and I'm back at square one.

In my office, if there is a pending sale? The house is off the market for my buyers.

However, our MLS does not require that the listing is changed to pending, they encourage it, but it is not required.