From: dim@soda.csua.berkeley.edu (D. Gerasimatos)
Newsgroups: misc.consumers.house
Subject: Re: Appraised value less than agreed upon price..Need some advice please
Date: Wed, 18 Feb 2004 22:27:07 +0000 (UTC)
Originator: dim@soda.csua.berkeley.edu (D. Gerasimatos)

In article ,
Christopher Green  wrote:
>dim@soda.csua.berkeley.edu (D. Gerasimatos) wrote in message news:...
>> In article <5dabc56.0402171332.31b281f0@posting.google.com>,
>> Simak  wrote:
>> >
>>  [snip!]
>> >
>> >We do have a mortgage contigency clause but not an appraisal clause.
>> >
>> >The mortgage contigency clause states that: 
>> >In order to help finance the acquistion of said premises, the BUYER
>> >shall apply for a convential bank or other institutional mortgage loan
>> >of X amount a prevailing rates, terms and conditions.  If despite the
>> >BUYERS diligent efforts a commitment for such loan cannot be obtained
>> >on or before the said date, the BUYER may terminate this agreement by
>> >written notice to the SELLER and/or the brokers as agents for the
>> >SELLER prior to the expiration of such time, whereupon any payments
>> >made under this agreement shall be forwith be refunded and all other
>> >obligations of the parties hereto shall cease and this agreement shall
>> >be void without recourse to the parties hereto.
>> 
>> 
>> This says that you are out of the deal (with all money refunded) if you
>> cannot obtain financing at X amount. Since you cannot obtain financing of X 
>> amount, the seller has no leg to stand on. You should and will receive
>> all of your money back.
>
>Not entirely -- if a loan for "X amount" could be obtained at a higher
>loan-to-value by paying PMI or additional interest or points, seller
>would still have an argument that the buyer could have obtained a loan
>at prevailing rates, terms, and conditions (for the higher LTV). If I
>were the seller or the seller's agent, I would sure consider making
>that argument.


The seller can make that argument, but will lose in court. I was in this
situation once and my real estate attorney advised me that it is *VERY*
difficult for a seller to win in court for non-performance. If the buyer
made a diligent effort to obtain a loan (realizing that diligent is
a subjective term) then the seller really has no recourse. My attorney
advised me that it is far more common for BUYER'S to win suits for
non-performance, because houses are unique commodities. From a seller's
viewpoint, they can just find another buyer and so proving damages is
hard to do. With the appraisal and the mortgage company standing
(effectively) in his corner and the contract pretty clear in its intent the 
buyer in this case can and will receive his money back and will win a suit
if it goes to that.


To think about it a different way, a seller cannot say that "you could
have obtained a loan for $10K with $190K down" or "you could have obtained
a loan at 40% interest with 6 points". Those are not prevailing rates,
terms, and conditions. The buyer already applied for a typical loan and
was rejected. The case is very clear cut and the seller would be a fool to
not see that.


Dimitri