Expert: Lisa Webber - 1/11/2008

Question
My question is. My fiance and I signed a contract on a home thinking we could get a Rural development loan and 3 days prior to closing we find out that the loan did not go threw and the mortgage company said ok here we will do a Conventional loan at 6.65& and our contract clearly stated 6.25% and not to exceed. so at this point my stress level was up too here!! So my fiance decided not to proceed with the home and revaluate our situation.. Our Agent then told us the sellers were going to sue us for moving cost and the price of the home.I have contacted a attorney and he said there is no reason I should be concernd!! Now what is your thought on this..?

Answer
You did the right thing in contacting an attorney; that is exactly what I would recommend.  Real Estate Agents are not attorneys.  I will share some information with you about contracts and different things that can happen. I'm not sure where you are located, but here in Maryland, Realtors use a basic, fill in the blank real estate contract.  The real estate contract is very long and has provisions in it to protect both buyer and seller.  It sounds as if your agent filled in the contract properly and put in the maximum amount that your loan can be.  This is in there to protect you, the buyer.  Let's say there was no maximum loan amount in there.  Anyone can get a loan, but if your credit were bad and there were no maximum interest rate in there and the mortgage company said, ok, we'll give you the loan at 15%, your payment would be much higher!  That isn't fair to the buyer who has been pre-qualified at an amount they are comfortable with when they sign the contract.  It sounds like your contract had this financing contingency in it, which is what most contracts have.  If you cannot get the financing that you were expecting to get when you signed the contract, it is not a contract anymore.  This is called a "financing contingency".  There are other possible "contingencies" in a real estate contract including a home inspection contingency where the buyer gets a home inspection and if there is anything that comes up that is unsatisfactory, say a roof that is in need of replacing now, they can require a seller to either fix the roof, replace the roof, or give them a credit to replace it themselves.  If the seller refuses, the buyer does not have to buy the house. Another is a home sale contingency which says that the buyer will buy the house *if* the buyer sells their house by a certain date.  If the buyer is unable to sell their house, they can either extend the contract if both the buyer and seller agree, or the contract is void and the house goes back on the market. Contingencies are in place to protect the buyer and make sure that all of the terms in the contract are satisfactory to the buyer.  It's unfortunate that the mortgage broker could not get you the loan that you thought you were going to get, but that does not mean that you have to get a loan and pay more for it than the contract says.  The seller is obviously upset because they already have planned on moving and it is unfortunate, but these things do happen sometimes, it's life.  In a perfect world, every transaction between buyer and seller would work out perfectly, but sometimes things don't go as planned.  The seller will have to put the house back on the market and find another buyer.  Hopefully the seller's agent is explaining this to them so that they understand that this was just an unfortunate occurrence, that you did not intend for it to happen, no one did.  You intended to purchase the house, but you were intending to purchase the house based on the terms agreed upon in the contract.  Anyone can sue anyone for anything, but if you have gone to an attorney and the attorney said you should not be concerned, then don't worry.  I wish you luck in finding a new home!