What to do if we were in a contract but then received a denial letter from our lender and the sellers refuse to sign the cancellation of contract and the broker refuses to release our earnest money?

The contract was subject to sale, our home was pending. The date of the contract has ended and have not heard from the seller or the realtor, are we out of this contract? They have no relisted their home as active.

Asked on February 12, 2016 under Real Estate Law, Iowa

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 4 years ago | Contributor

If you could not go through with the purchase for *any* reason, you are in breach of contract, unless the reason you could not buy was a contingency in the contract--i.e. the contract specifically stated that if you could not purchase for this reason, you would be allowed out without liability. You mention in your question that the contract was subject "to sale, our home was pending," but you also write that your lenders denied you. If the problem is, you did not qualify for a mortgage and that is why you could not purchase the home--and the sale was not continget on financing--then you are in breach of contract, the sellers may re-list the house, but they also may keep your earned money due to your breach.


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