March 6th, 2017 at 5:06 pm
Answer: Yes, unfortunately. The buyers cannot back out under their loan contingency if their loan is declined because they cannot sell their current home. Paragraph 4 of C.A.R.’s Residential Purchase Agreement explicitly states that if, as in your situation, the purchase is not contingent on the sale of the buyers’ existing property, the buyers’ ability to obtain financing is also not contingent upon the sale of the buyers’ property. This provision is certainly tricky given that it’s embedded in paragraph 4 for the Sale of Buyer’s Property, instead of paragraph 3J concerning the Loan Contingency. If, however, the lender would simply decline the loan based on your buyers’ lack of income, rather than require them to sell their existing home, then your buyers can cancel under their loan contingency and be entitled to the return of their deposit.
-Thank you to Josalyn Burcham (Santa Barbara Office) for suggesting this week’s legal tip.
Copyright© 2017 Berkshire Hathaway HomeServices California Properties (BHHSCP). All rights reserved. Any unauthorized reproduction or use of this material is strictly prohibited. This information is believed to be accurate as of March 6, 2017. It is not intended as a substitute for legal advice in individual situations, and is not intended to nor does it create a standard of care for real estate professionals.
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