Real estate Settlement Issues (for sale, insurance, credit)

[rodneytt]

I was about to sell my house. On the settlement day, the settlement company said that they were still waiting on the Lenders Document and Funds. The settlement agent said I could sign my part of the papers that day and extend the addendum for one more day. My agent also said that happens all the time and it is safe. My agent called me the next day and said that she had some bad news, the buyers did not get the loan. Seller which is myself, buyers and Brokers did sign the release form and all was release. I call the settlement company and asked for a copy of the papers that I had signed, but she said it was shredded up. That they don't keep denial contract in the office, they get rid of them by shredding them up. I check with my county Clerk's office and the house is still on my name and nothing was recorded. Should I be concerned about any thing? I just don't trust my agents.

[Carlingtonian]

Seems hinky to me. However: If the buyers had a financing contingency (meaning they still get their EMD back if the financing falls through), then I don't see what what you're really out (although it's really weird to shred the document without giving you a copy).

[rodneytt]

Originally Posted by rodneytt

I was about to sell my house. On the settlement day, the settlement company said that they were still waiting on the Lenders Document and Funds. The settlement agent said I could sign my part of the papers that day and extend the addendum for one more day. My agent also said that happens all the time and it is safe. My agent called me the next day and said that she had some bad news, the buyers did not get the loan. Seller which is myself, buyers and Brokers did sign the release form and all was release. I call the settlement company and asked for a copy of the papers that I had signed, but she said it was shredded up. That they don't keep denial contract in the office, they get rid of them by shredding them up. I check with my county Clerk's office and the house is still on my name and nothing was recorded. Should I be concerned about any thing? I just don't trust my agents.

Real Estate:

Thanks, Mr. Carlingtonian. Thanks very much.

Actually, they did give me a copy of the contract when I signed. I am not sure if it's the same set of documents. She had an for that said " Incomplete Settlement Agreement-Sale" on line says " A Prerequisite for the closing are required.(The required documents/actions) Then she she wrote in "Lender Package - Lender Funds" Should I see a Lawyer to be safe?

[Margery]

I am guessing that the buyers submitted a prequalifying letter rather than a pre approval letter from the lender. Before ratifying a contract the seller should ask for a letter from the lender stating that credit has been checked, employment has been verified and the lender has verified that buyer has assets to close and the only contingencies are clear title and that the property appraises for the agreed upon sale price.

If the closing documents were not signed by both buyer and seller it is customary to dispose of them, they are not binding.

I would have advised you not to sign the release without retaining at least a part of the earnest money deposit. You have suffered damage by taking your house off the market and perhaps missing a buyer who could have qualfied for a loan. Whether or not there was a financing contingency, all parties to the contract must sign a release before the earnest money deposit is released. I have seen earnest money deposits remain in escrow for years when both the buyer and seller were too stubborn to reach an agreement.

[Carlingtonian]

My pleasure.

It couldn't hurt to consult a lawyer.

Your realtor should have made it very clear what contingencies you as the seller would accept. (Financing and home inspection are common contingencies, since few buyers would be willing to risk their earnest money on the gamble that an uninspected house is structurally sound with no needed repairs and that their loan will go through.) What I'm saying is, if you did accept financing as a contingency, and that was the reason they couldn't make good on the contract, then they were entitled to get their earnest money deposit back--and so in that case, I don't see what you'd have to gain by pushing this further. Though I would look seriously at getting a new realtor and settlement company.

Best of luck!

[rodneytt]

Thanks Margery,
I just called the settlement company and asked if the buyers did signed their documents, and she said no. The loan fell through. I am satisfied with all the answers from you all.
Thanks to all, and have a wonderful blessed day.

[rodneytt]

Originally Posted by rodneytt

Thanks Margery,
I just called the settlement company and asked if the buyers did signed their documents, and she said no. The loan fell through. I am satisfied with all the answers from you all.
Thanks to all, and have a wonderful blessed day.

I think I will still see a Lawyer.

[LetsRock]

Sounds fishy. The buyer should have been fully approved a few days before settlement and not the day of. I bet the buyer did not actually want the house and sabatoged their ratios so that the loan would not be approved.

[persnicketygal]

But Rodney: WAS there a contingency on the part of the would-be buyers of getting the loan?

If there wasn't, wouldn't there now be a question of them having to forfeit their earnest money?

(Not sure if Rodney's report of the "prerequisite for closing: lender package" means contingency for sale or just a warning to the would-be buyer that they need to have their paperwork -- not the actual approval -- in order.)

Also, aren't there fees that the settlement company charges even if the deal flops? It has research to do and papers to prepare. What happens to those fees? Does the company just wipe it off the billing books and put it into their "business loss" column?

(My settlement went smoothly, so I never had to venture into "what if" territory, thank goodness.)

[kcmbrooks]

Originally Posted by persnicketygal

Also, aren't there fees that the settlement company charges even if the deal flops? It has research to do and papers to prepare. What happens to those fees? Does the company just wipe it off the billing books and put it into their "business loss" column?

I'd like to know the answer to this as well. I just went through something similar. Had a contract on my house, was supposed to close on 8/5. Found out the loan processing couldn't be done on time due to the appraisal being ordered too late. Then we were supposed to close on 8/15. We found out on 8/12 that the purchaser's loan was denied, supposedly due to a clerical error having to do with the homeowner's insurance policy. So we stupidly gave the purchaser another opportunity to secure financing. Ended up wasting almost 3 more weeks before finding out that his financing was denied again. We just signed the release today and are supposed to be getting his earnest money deposit of $500 (whoop dee do).
And what is the difference between a pre-qualfying letter and a pre-approval letter? Our purchaser had a pre-approval letter (as far as I can recall), but he still couldn't get the financing.