what happens when the loan does not come through on the contracted closing date
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what happens when the loan does not come through on the contracted closing date
what are the buyer’s responsibilities when the lender does not finalize the
loan on the contracted closing date?
Asked on June 20, 2017 under Real Estate Law, New Jersey
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 6 years ago | Contributor
The buyer is still obligated to the contract regardless of whether he or she gets the loan in time, unless and only to the extent there is a financing or mortgage contingency in the contract, the buyer is still in time to exercise it, and he or she does exercise it in accordance with its terms. Otherwise, if there is no such contingency or the time to exercise it has passed, the inability to get loan in time does not absolve the buyer of any of his/her obligations. If he/she cannot close in time, he/she will be in breach of contract: the seller can refuse to sell while keeping the deposit or earnest money, and possibly even suing for additional amounts if the seller's losses provably exceed the amount of the deposit (e.g. if the deposit would only be equal to, say, 4 months of the "carrying costs" for the property, but as a result of the buyer's breach, it takes the seller another 7 months to sell, so he or she is paying to carry the property [mortgage, taxes, etc.] for 7 more months--in that case, the seller could potentially sue the extra 3 months of cost not covered by the deposit.)
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