Expert: Connie Wildasinn-Broker,GRI,Realtor® - 2/6/2009

Question
QUESTION: hello my question is is there any way i can get my money back out of escrow if the bank approved me twice and then on the day before closing they FHA underwriter denies the approval. the problem i am facing is that i was trying to get a property from hudsonandmarhall auction company and they state that they will keep the money because their agreement sisnt based on financing and so now im out of my $2,500 that put down i did everything the appraisal the inspection the HOA approval and fees and now FHA is giving me a very had time is there anything i can do.


ANSWER: Hi Gigi,

You don't mention the state you are dealing in, but in general I will answer your question.

When you buy property in the format you did IE: Auction ... there are rules that are completely to themselves.  One facet is the contigency factors.  You stated that financing is NOT a contigency of the purchase contract.  Typically that is the case, as is no physical, or disclosures! You are buying a property that is owned by an investor, they have never lived at the property and you are paying less than market value for the property ... so you take a greater risk factor in than if the property was listed in the local MLS, you used a buyers agent to represent you and your interests, and keep that deposit out of jeporady during the contract phase...

But now you are unable to get the financing, your deposit was released long before, at the time you accepted the bid and opened escrow.  Most likely your deposit was non-refundable... You may have had an inspection phase, although most auctions have a "no contigency" clause... in other wise 'Buyer Beware' Know exactly what you are buying and do all of your homework upfront. Including the loan.  

Take this as a cheap lesson learned at only $2,500... it could have been thousands more.  

Now is a great time to buy a property, get yourself a buyers agent and get shopping again...

Good luck...



---------- FOLLOW-UP ----------

QUESTION: i am actually in the state of florida but is it ok for the bank to do that to people you said cheap lesson but really thats alot to me reason is im only 21 and im trying my best to do whats right and the bank did approve me more than 1 occassions thay had me give them multiple pay stubs and bank statements they pulled my credit and evrything and they sent me the amount im approved for and everything now its time to close and they are giving me a difficult time i dont know why nothing changed still have my job and still have the money and everything can they just change their minds?

Answer
Hi Gigi,

The bank told you your were approved, but I would guess that they had stipulations that had to be meet, either from you or the property in order to 'fund' the loan - that is the real approval... if something did not come in the way the bank wanted or would approve, then you are denied.... you mentioned this has happen 2 times.. what are the reasons for the denial...

What is the reason they are giving you? or are they simply late in closing and the seller will not wait?  Many loans are taking up to 30-45 days past the original agreed date to finally close, with multiple conditions coming back that really have nothing to do with anything... as the market seizes up this will become more and more common I believe... the credit crunch is not over yet, not even close.... and the underwriters are all looking out for their jobs and next check next Friday... no one wants to be where the buck stops... and take responsibility....

If nothing has changed on your side, income, expenses, savings, etc... and you are doing an FHA transaction, then it could be the property that is not acceptable to the bank...ASK, you have a right to know exactly what is going on with your loan.

Keep in mind they (the bank) are NOT party to the transaction, they have no responsibility to the deal, this really is where a good buyers agent comes in handy, but from what it sounds like, you bought from the sellers with out representation for you... and a contract is a contract...

Back to your question can the bank just change their minds... yes and no... it is not that they just change their minds... but many times the loans qualifiers change even during the process and you must fit in their qualifications....get to the bottom of why you are getting turned down and keep pushing till you get an answer...