Expert: liznarr - 7/13/2006

Question
Hello my question is this. About 1 year ago I entered into contract to have a home built in southern Florida. I put a down payment at the time with the expectation to pay the remainder at the time of closing. Recently, my situation (financial) changed and I would be unable to close on this property and assume the mortgage. When I pre- qualified for the builder I did so on my own with out a co signer to the contract. I informed the builder's agent of my new situation and my inability to close on the contract or my ability to qualify now.  According to the agent and per the contract, I would be able to cancel the contract if my situation changed and I alerted the builder (which i did). Now the builder is attempting to force me to get a cosigner to qualify for the loan so that I may close the contract with them. Furthermore, since I am unwilling to that, they are informing me that they will follow this up with their corporate lawyer and this would reflect poorly on my credit bureau.  Can they do this? Is there ianything that I can do ?
They are a well know builder in the area and they can certainly resell the home to another buyer. Do you have any suggestions for me.
thank you for your time.

Answer
Hi Fred,

Sorry for the delay in responding.

Your Contract of Sale will prevail with whatever language was printed and/or written into it.  Always go back to your Contract when any questions arise.

It sounds like the builder is trying to bully you into closing.  Hopefully your Contract of Sale reads that your earnest money will be refunded in the event of a non-closing through no fault of your own.  If all of the following apply, in my opinion, you have no obligation to close:

1.   Your Contract was subject to financing
2.   You are the only Purchaser on the Contract
3.   Your lender refuses to grant you the loan, and
4.   There is no language in your Contract requiring you to have a co-signer to qualify ---

My suggestion would be to first get have your lender write you a letter stating that you do not now qualify for the loan, and that they will not fund your loan.  

I would then mail a copy of the lender letter, along with your own, via Certified Mail to the Broker-in-Charge of the builder’s agent (assuming this is who is holding your earnest money) and also copy the builder, and request that your earnest money be refunded in full immediately.

If the builder’s agent is reneging on what he/she told you previously about being able to cancel the Contract if your situation changed, I would include language in your letter to the Broker-in-Charge referencing that.  You can, if you decide to, file a formal complaint against him/her with your state’s Real Estate Commission.

If you meet with any resistance, or if your earnest money is not promptly refunded, simply refuse to close; but at that point, I would recommend you contact a local attorney for advice.  

You did not say whether or not you have your own agent, but if you do, your agent should also be involved for you.

Good luck to you, and write again if you have additional questions.

Regards,
Elizabeth Narr