Can we break can purchase contract if our loan was denied due to hazardous material found in the ceiling?

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Can we break can purchase contract if our loan was denied due to hazardous material found in the ceiling?

We are in a contract to buy a place. We used the seller’s inspection (reputable company) which mentioned nothing about possible asbestos in popcorn ceiling. Spoke with inspector who said absolutely no reason to believe asbestos in ceiling. I picked up some pieces off the floor where it’s crumbling and sent it to the lab. Sure enough, asbestos. Sellers will do nothing to remedy. Our FHA loan app is now being denied due to hazardous material. They are now saying they will sue us. It is now 2 days past the date we were to have loan approval. Do we have a defense?

Asked on July 13, 2011 under Real Estate Law, Nebraska

Answers:

FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

Where there any contingencies that had to be waived in your contract to purchase the property? Meaning, was the purchase of the property subject to approving all home inspections and getting a loan in a given period?

If so, and you did not waive the above contingencies to close the sale, you should be in a good position to back out of the contract for conditions concerning the sale not being approved.

Do you have a real estate agent representing you in the purchase? If so, what does he/she say about you not closing escrow? Did the sellers fill out a transfer disclosure statement regarding conditions about the property? If so, was there any mention of asbestos?

If the sellers knew nothing about the asbestos, you have another possible defense for not closing escrow, mutual mistake of material fact. Meaning, both you and the sellers assumed no hazardous material in the home before close of escrow. Good thing you retained a good home inspector before closing escrow.  


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