Lost home purchase deposit due to bad advice.

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DCal430

Diamond Member
Feb 12, 2011
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Someone I know agent/broker told them they could switch to an FHA loan and their would be no problems. FHA ended up rejecting the home due to minor issues with the home like chipped wall. Now they come to find because they switched to FHA without seller permission they forfeited their whole deposit. The agent/broker assured them they would have no issue switching to FHA. They lost over 10,000. What can they do?
 
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DCal430

Diamond Member
Feb 12, 2011
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SunnyD said:
The seller doesn't get to say what type of loan the buyer chooses. WTF?
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When you sign a home purchase contract it does state what loan type you will get and from whom. They seller must agree to this. If you switch loans and it goes through all is fine, but once it falls through you forfeit your deposit. They were unaware of this, relying on what the agent told them.

So yes a seller does have a say in what loan you can get.
 
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DCal430

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Feb 12, 2011
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waggy said:
/this

why would you do that anyway?
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They would only have to put 3% down for an FHA and agent told them it would be approved just as fast as their original planned conventional with 10% down.
 
SunnyD

SunnyD

Belgian Waffler
Jan 2, 2001
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DCal430 said:
No, but when you sign a home purchase contract it does state what loan type you will get and from whom. They seller must agree to this. They were unaware of this, relying on what the agent told them.
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"Contingent upon securing financing." It never says from whom or how.

It sounds like they were at closing at financing was pulled? Otherwise, well, it's their own damn fault for not pursuing other means of financing.

And usually if the loan was not approved for material defect with the home based on inspection, that's the seller's responsibility to either repair or release from contract obligation.

My guess is your "someone you know" went into buying a house listed "As-Is" and didn't read the fine print, didn't they? Tough luck.
 
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Capt Caveman

Capt Caveman

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Jan 30, 2005
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DCal430 said:
When you sign a home purchase contract it does state what loan type you will get and from whom. They seller must agree to this. If you switch loans and it goes through all is fine, but once it falls through you forfeit your deposit. They were unaware of this, relying on what the agent told them.

So yes a seller does have a say in what loan you can get.
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No it doesn't. All there is a financing clause that they have to have financing by a certain date.

In regards to the deposit, they potential buyers need to sign-off on the release of the funds from escrow. The sellers can sue but it's always better to negotiate and come to a settlement.
 
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DCal430

Diamond Member
Feb 12, 2011
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SunnyD said:
"Contingent upon securing financing."

It sounds like they were at closing at financing was pulled? Otherwise, well, it's their own damn fault for not pursuing other means of financing.

And usually if the loan was not approved for material defect with the home based on inspection, that's the seller's responsibility to either repair or release from contract obligation.

My guess is your "someone you know" went into buying a house listed "As-Is" and didn't read the fine print, didn't they? Tough luck.
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It was an REO, sold as is. That contingency is irrelevant they can not change financing without seller approval, they did and lost their deposit.
 
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DCal430

Diamond Member
Feb 12, 2011
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Capt Caveman said:
No it doesn't. All there is a financing clause that they have to have financing by a certain date.

In regards to the deposit, they potential buyers need to sign-off on the release of the funds from escrow. The sellers can sue but it's always better to negotiate and come to a settlement.
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Yes it does, all home purchase contracts state the loan type, I know for fact in California they do.
 
SunnyD

SunnyD

Belgian Waffler
Jan 2, 2001
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DCal430 said:
It was an REO, sold as is. That contingency is irrelevant they can not change financing without seller approval, they did and lost their deposit.
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Again, the seller has absolutely NO SAY in the financing (unless the seller happens to be the one doing the financing themselves). The only thing the seller cares about in the end is the check that they get at closing. The BUYER is responsible for choosing and securing financing however they see fit, and can change their mind on it as many times as they change their underwear prior to actual closing.
 
waggy

waggy

No Lifer
Dec 14, 2000
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I have doubts the seller cares who the loan is through.

I suspect the fact is the financing fell through. wich killed the deal. so the seller is then claiming the deposit (understandable too).
 
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Vdubchaos

Lifer
Nov 11, 2009
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Reason # 6435345 why people should stay away from Brokers/agents.

Hard to find a good one in the ocean of sharks.
 
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DCal430

Diamond Member
Feb 12, 2011
6,020
9
81
SunnyD said:
Again, the seller has absolutely NO SAY in the financing (unless the seller happens to be the one doing the financing themselves). The only thing the seller cares about in the end is the check that they get at closing. The BUYER is responsible for choosing and securing financing however they see fit, and can change their mind on it as many times as they change their underwear.
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You are wrong, it is stated in every home purchase contract what financing you are getting, if you change and it causes a delay and falls through you forfeit your deposit.
 
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DCal430

Diamond Member
Feb 12, 2011
6,020
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81
waggy said:
I have doubts the seller cares who the loan is through.

I suspect the fact is the financing fell through. wich killed the deal. so the seller is then claiming the deposit (understandable too).
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Yes the seller wouldn't be able to do anything if the new loan went through, but be because the loan change caused a delay and financing to fall through, they can claim the deposit.
 
purbeast0

purbeast0

No Lifer
Sep 13, 2001
53,510
6,351
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sounds like this was a breach of contract because the loan stated on the contract is not the loan that was contractually agreed to. sounds like your friend is screwed.

best of luck to them though. i went through a hassle to get my deposit back on a house that fell through because the seller did not fix stuff they agreed to fix prior to settlement, and i backed out the day we were supposed to go to closing. i ended up getting my money back but it was a hassle. made a thread on here about it actually.

so glad we did not purchase that house, in a MUCH MUCH nicer house now.
 
waggy

waggy

No Lifer
Dec 14, 2000
68,143
10
81
DCal430 said:
Yes the seller wouldn't be able to do anything if the new loan went through, but be because the loan change caused a delay and financing to fall through, they can claim the deposit.
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right. but that is nto what you said.

" Now they come to find because they switched to FHA without seller permission they forfeited their whole deposit."


we are just pointing out this is not true. The seller has no say on WHO teh buyer gets a loan from.

Since it fell through they can claim deposit (rightfully so too) and have the right to end the contract.

this has nothing to do with who the buyer was getting the loan.



DCal430 said:
I want to know their options, can they write off the deposit or sue the agent?
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IF they have proof sue the agent. but not sure it will be successful
 
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