Legal obligation to purchase after financing falls through?
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Legal obligation to purchase after financing falls through?
My boyfriend was in the process of purchasing a home. The sellers delayed our closing for over 2 months in order to do renovations to their new home before moving in, and to avoid paying rent. When it was finally time to schedule closing, the rates jumped and he was no longer eligible for the loan. He gave the sellers 48 hours to pay the $4000 necessary to pay the points to make him eligible for the loan. The deadline came and went and he pulled out of the deal and walked away from the house. Now, days later the sellers want to pay the $4000 and my boyfriend is saying the deal is no longer on the table. We believe this is a voidable contract and they believe he is still on the hook and refuse to sign the mutual release. Is he legally obligated to follow through with this purchase? The purchase agreement expires on the 18th of next month.
Asked on October 12, 2016 under Real Estate Law, Ohio
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 7 years ago | Contributor
Did the contract of sale contain a financing contingency or similar term stating that if your boyfriend could not get financing, he could terminate the deal without penalty? If so, and if he complied with the terms (e.g. terminated in time, with the proper notice, etc.), then he can walk away.
But if the contract did not contain a financing contingency of some type, and/or it did but your boyfriend did not comply with its requirements, then he is obligated to buy the house; and if he cannot or does not, the sellers could sue him, such as for their costs (including carrying costs from having to hold onto the house for longer) due to this failure to go through with the transaction. A contract of sale is enforceable even when one party is in financial distress or lacks the financial ability to purchase; and an inability to get financing is *only* grounds to get out of the contract if there was a financing contingency.
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