What to do when you cannot close with the builder
Buyers who signed agreement for new homes or condominiums in the past 2-4 years are now having difficulties coming up with the money to close once their home is ready. In many cases the appraised value has decreased almost 20% and they cannot get a mortgage to close. Here are 5 important lessons to know
Can you get out of the deal
I am asked this question most often by buyers in this predicament.. It is not easy to get out of a deal. The main reason would be if the builder did not finish your home in time, according to the commitments made at the time of signing. The builder may have sent you a notice of unavoidable delay to try and extend these conditions. Do not sign this. Have a lawyer review your contract to see if there is any way you can just cancel it at this time.
Can you just offer the builder the deposits and ask for a release?
In my experience this will also not work. Let’s say you bought a home for $900,000.00 and you paid $100,000 in deposits. The home is now worth $700,000. The builder will not take your $100,000 deposits in exchange for a release. Unfortunately if you cannot close your deposit will be forfeited, the builder will re-sell to someone else and can still sue you for any further loss that they incur.
Can you work with your builder for a solution?
In many cases you can. Some builders may be able to recommend a lender that will still be able to provide you a mortgage to be able to close. Others my agree to your assigning your contract to a new buyer or to put your unit back into their inventory and try to sell it to another buyer on your behalf. Unfortunately the assignment market is extremely challenging right now
What if I am a potential buyer for this assignment?
This may be a great opportunity for anyone interested in buying a brand new condominium at a discount. You get to see the completely finished product, have certainty about all of the closing adjustments and be able to close without any delays.
What if I am a resale buyer and I was pre=approved for a mortgage but now I cannot get the approval and I cannot close?
Just because a buyer gets pre-approved for a loan, this does not mean that the lender will close. There are always conditions on any pre-approval and one is typically that an appraisal is conducted that is satisfactory for the lender. Always make sure that a finance condition is included in any agreement and do not waive any finance condition until you know for sure that the lender has completed their appraisal and approved the sale price.
There are solutions out there. Deals can be extended, properties can be put back on the market to try and reduce the losses suffered, buyers may be able to borrow from private lenders for a short term loan until their financial situation improves or a mutual release can be negotiated Always get legal advice before suggesting any solution.
If you have any question as to what to do when things go wrong on any real estate deal please contact me at 1-888-876-5529 or at [email protected]
