Contingency sales are like dominoes, only with money
October 28, 2016 12:41 PM Subscribe
We were supposed to move on Monday. We were selling our previous home and we had an approved contingent offer on a new home. Closing dates were set. We found out today the buyers for our home had their loan fall through. Now what do we do?
The people who had been buying our house had preapproval but have since been denied for some, as yet unspecified reason.
We were buying the new home with a contingent offer, FHA loan, 3.5% down. Although our incomes are good, I changed jobs last year to a sales position with a higher percentage of income through commission and bonus. Our lender said they had to take a very conservative view of my future earnings since I had not been at the job for two years. So we were not able to be approved to buy without a contingency.
We were selling our old home for less than we paid for it, as was inevitable since we bought it in 2007. That was the reason for the low down payment: we weren't getting much out of this house. We could probably come up with some
additional cash, but not much.
Our agent says the would-have-been buyers are looking into alternate financing and she is putting them in touch with a few lenders she knows well to see if that helps. She has reached out to our lender to see exactly how much extra cash we would need to scrape together or borrow to be approved non-contingent.
So we're not moving yet. We know that. We took care of the obvious stuff--postponing the movers, insurance etc.
How screwed are we? Have you been through this:? What happened? What else can we do?
The people who had been buying our house had preapproval but have since been denied for some, as yet unspecified reason.
We were buying the new home with a contingent offer, FHA loan, 3.5% down. Although our incomes are good, I changed jobs last year to a sales position with a higher percentage of income through commission and bonus. Our lender said they had to take a very conservative view of my future earnings since I had not been at the job for two years. So we were not able to be approved to buy without a contingency.
We were selling our old home for less than we paid for it, as was inevitable since we bought it in 2007. That was the reason for the low down payment: we weren't getting much out of this house. We could probably come up with some
additional cash, but not much.
Our agent says the would-have-been buyers are looking into alternate financing and she is putting them in touch with a few lenders she knows well to see if that helps. She has reached out to our lender to see exactly how much extra cash we would need to scrape together or borrow to be approved non-contingent.
So we're not moving yet. We know that. We took care of the obvious stuff--postponing the movers, insurance etc.
How screwed are we? Have you been through this:? What happened? What else can we do?
When we bought our current place, we were able to be approved without having to sell our previous place as long as we could show that we had assets available to cover 6 months of mortgage payments for both homes.
I had sufficient funds in a Roth IRA to cover that amount and they accepted it (there was some quibble about whether the more substantial traditional 401K could have counted as well, what with tax penalties and the like, but we didn't need to go there). All I needed to show them was a statement (which was a PDF that I printed from the web b/c who even keeps paper statements anymore?) -- but I did investigate options related to a 60 day rollover grace period if I needed to have liquid cash to make the underwriter gnomes happy.
So, maybe that's an option that your lender hasn't considered for you yet?
posted by sparklemotion at 2:47 PM on October 28, 2016 [1 favorite]
I had sufficient funds in a Roth IRA to cover that amount and they accepted it (there was some quibble about whether the more substantial traditional 401K could have counted as well, what with tax penalties and the like, but we didn't need to go there). All I needed to show them was a statement (which was a PDF that I printed from the web b/c who even keeps paper statements anymore?) -- but I did investigate options related to a 60 day rollover grace period if I needed to have liquid cash to make the underwriter gnomes happy.
So, maybe that's an option that your lender hasn't considered for you yet?
posted by sparklemotion at 2:47 PM on October 28, 2016 [1 favorite]
This happened to us in March. The day our moving truck showed up (for a cross-country move) we were notified that our buyers didn't qualify for their financing. We had to make a decision whether to give them more time to pull together financing or to move on to try to find another buyer.
Based on the specific circumstances of our buyer, and the fact that we were moving across the freaking country and would be homeless unless we sold, we decided to terminate with the buyer and find a new buyer as quickly as possible. Because we already owned a rental house and my husband didn't have a job in our new location, we could not continue with our purchase without selling our house first. Luckily we had a backup offer and they were still interested and able to buy our house, but their offer was for a LOT less money and it set us back about a month because of inspections and loan machinations -- so we were homeless for a month in a new place with kids and pets and had to really finesse our sellers to not cut us loose in the interim (which involved putting down a large amount of earnest money which was nonrefundable if we didn't close) AND we ended up with about forty grand less in the end. IT SUCKED.
So, anyway. Sorry, I still have lots of feelings, apparently. Here are your options:
1. Wait for them to come up with alternative financing. They may or may not be able to, in which case you've wasted time because you'll end up terminated anyway.
2. Cut them loose right now and try to find a new buyer. If you're in a hot area, do an open house, give a deadline for offers, and accept a backup offer if you get more than one. If you're not in a hot area, relist at your rock-bottom price and advertise that it's priced for a quick sale, and that you're interested in a quick close.
3. See if you can continue with your purchase without your sale. Then you have more time to get a better price.
Good luck. That totally sucks.
posted by rabbitrabbit at 5:58 AM on October 29, 2016
Based on the specific circumstances of our buyer, and the fact that we were moving across the freaking country and would be homeless unless we sold, we decided to terminate with the buyer and find a new buyer as quickly as possible. Because we already owned a rental house and my husband didn't have a job in our new location, we could not continue with our purchase without selling our house first. Luckily we had a backup offer and they were still interested and able to buy our house, but their offer was for a LOT less money and it set us back about a month because of inspections and loan machinations -- so we were homeless for a month in a new place with kids and pets and had to really finesse our sellers to not cut us loose in the interim (which involved putting down a large amount of earnest money which was nonrefundable if we didn't close) AND we ended up with about forty grand less in the end. IT SUCKED.
So, anyway. Sorry, I still have lots of feelings, apparently. Here are your options:
1. Wait for them to come up with alternative financing. They may or may not be able to, in which case you've wasted time because you'll end up terminated anyway.
2. Cut them loose right now and try to find a new buyer. If you're in a hot area, do an open house, give a deadline for offers, and accept a backup offer if you get more than one. If you're not in a hot area, relist at your rock-bottom price and advertise that it's priced for a quick sale, and that you're interested in a quick close.
3. See if you can continue with your purchase without your sale. Then you have more time to get a better price.
Good luck. That totally sucks.
posted by rabbitrabbit at 5:58 AM on October 29, 2016
Response by poster: The would be buyers have already rented a place. In 24 hours. That smells pretty fishy. Apparently it was their agent who was anxious to get alternate financing set up. The couple moved on lightning fast.
Actually, this was a weird case to begin with as the wife did the home shopping on her own while the husband was in California and he saw it for the first time last weekend. Also weird: they had asked for NOTHING in their inspection.
I have this sinking feeling he just didn't like it for whatever reason and they bailed.
We asked for proof their loan was denied though I don't how we could ever get that.
This sucks double now.
Our agent and lawyer are asking the people we were buying a home from for an extension. And now we have to get our house from moving-in-two-days chaos to ready to show by tomorrow.
And our lender says they won't finance us for the new house unless we sell this one first.
Shit.
posted by DirtyOldTown at 10:02 AM on October 29, 2016
Actually, this was a weird case to begin with as the wife did the home shopping on her own while the husband was in California and he saw it for the first time last weekend. Also weird: they had asked for NOTHING in their inspection.
I have this sinking feeling he just didn't like it for whatever reason and they bailed.
We asked for proof their loan was denied though I don't how we could ever get that.
This sucks double now.
Our agent and lawyer are asking the people we were buying a home from for an extension. And now we have to get our house from moving-in-two-days chaos to ready to show by tomorrow.
And our lender says they won't finance us for the new house unless we sell this one first.
Shit.
posted by DirtyOldTown at 10:02 AM on October 29, 2016
Response by poster: The sellers of the home we wanted gave us an extension. We put our house back up for sale and the first weekend, the first showing, some folks made an offer we accepted.
While part of me is inclined to huzzah at my good luck, I am nevertheless pretty wary at this point. Once the lawyers and inspectors do their thing and the closing is scheduled with all of the paperwork on file, I will let myself hope again. Peobably.
posted by DirtyOldTown at 7:41 AM on November 14, 2016 [2 favorites]
While part of me is inclined to huzzah at my good luck, I am nevertheless pretty wary at this point. Once the lawyers and inspectors do their thing and the closing is scheduled with all of the paperwork on file, I will let myself hope again. Peobably.
posted by DirtyOldTown at 7:41 AM on November 14, 2016 [2 favorites]
Response by poster: We did end up getting this house by the way. We just redid our deck,
too. It's nice out there. You should come have a margarita.
posted by DirtyOldTown at 8:28 AM on August 1, 2017
too. It's nice out there. You should come have a margarita.
posted by DirtyOldTown at 8:28 AM on August 1, 2017
« Older Looking for baby books (board books) in Spanish | YANMD - but what is this mystery? And should I see... Newer »
This thread is closed to new comments.
You have no way of knowing whether they have a big problem or whether the bank just has some weird technical requirement that they can't meet. Presumably you have the choice to grant them an extension or to put the house back on the market or some combination. Maybe your realtor can try to feel out their realtor to see if this was a surprise or whatever.
Presumably your sellers have the same options (extend or relist). Usually everybody wants to just proceed if possible and get 'er done, but there are no guarantees that somebody won't run scared. Good luck, I hope it all works out with a couple of weeks' margin.
posted by acm at 12:50 PM on October 28, 2016 [1 favorite]