We are selling our condo, we were supposed to close on it last Friday. At the last minute the risk underwriter denied our buyers mortgage because of something the risk underwriter read in the condo meeting minutes about a potential special assessment. As of today there is no special assessment but the board appears to be talking about one (we had no knowledge of this) We turned over all the documents that were requested (docs, by-laws, rules) we had no other information (we don’t go to the board meetings – we just had a baby) and informed the realtors that if more information is needed mgt. company will give it to them. It appears they never requested any other info (budgets, minutes…). We have offered to put money into an earnest account to cover any potential special assessment. My question is this…
They did not perform due diligence, they had an inspection no problems and we have no contingencies on this contract. Can they sue us? Can we sue them? If this goes belly-up what will become of the earnest money? Thanks!

I don't think anyone needs to be thinking about suing anyone at this point.

The underwriter obviously had some concerns about the possibility of an assessment that may have been beyond the purchaser's ability to pay and cause them to default on the loan; it's not an uncommon occurance.

Since an assessment is usually for an undetermined amount until it's voted on you would have no way of knowing how much to put in escrow to cover it.

If this goes belly up because of failure to get financing and financing was a contingency in the loan then the buyers should be entitled to their earnest money back.

I think the buyers did perform their due diligence this was just one of those unforseem things that sometime happen in transactions.

Being the devil's advocate the potential assessment also could be said to be something you should have known about and should have disclosed to them up front.

Maybe at least one of you should start attending the board meetings to find out what's going on that could affect your home.


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Jim Lee, CRS, ABR, GRI, e-PRO
Realty Executives Associates
Knoxville, Tennessee
http://www.KnoxvilleMLS.com
Jim@KnoxvilleMLS.com
1999 REALTOR of the year, Knoxville Association of REALTORS

I am not an attorney, I am not your attorney, and I am not giving you any legal advice. This response is only given for informational purposes and should not be construed or substituted for legal advice.

We just found out from the building mgt. company that the board voted just a couple of weeks ago to go ahead and start accepting bids for repair work. Before this recent vote the residences of the building were told that the developers would be doing and paying for the repair work. The building is currently involved in a lawsuit with the developer. The buyer knows this. We now understand that lawsuit with the developer has stalled. The board wants to move ahead with the repair work (no safety issues - just shoddy work on the part of the developer).

We are offering to put money in an escrow account. Per the contract we are not obligated to pay for any special assessment that is not imposed before closing.

We have NO contingencies on this contract. Failure to secure financing would, unfortunately, put our buyer in breach. We disclosed everything we knew at the time of the contract being signed. We had no knowledge that the building’s circumstances had changed. As you said, this is an unforeseen problem. We are trying to be very decent people by paying for a possible problem for our buyer. We are now a week past the original closing date.

What would suggest we do?

Why would failure to secure financing put the buyer in breach of contract???

Financing is a pretty standard clause in most sales agreements, i.e. no loan, no sale. Is yours different???

Can this buyer buy your condo without getting a loan???

I'm sure your buyer is trying to be a decent person too and buy your condo since he made an offer you accepted, but he probably has to get a loan to do so.

Once you get an exact dollar figure for the upcoming assessment you may be able to put that amount in escrow for your buyer and go back to the underwriter with that new information.

The underwriter is concerned about an unknown amount of assessment dolars impacting their client's ability to pay them and perhaps jepordizing their mortgage.

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Jim Lee, CRS, ABR, GRI, e-PRO
Realty Executives Associates
Knoxville, Tennessee
http://www.KnoxvilleMLS.com
Jim@KnoxvilleMLS.com
1999 REALTOR of the year, Knoxville Association of REALTORS

I am not an attorney, I am not your attorney, and I am not giving you any legal advice. This response is only given for informational purposes and should not be construed or substituted for legal advice.

If there is a "time is of the essence" clause in your contract and you're past the closing date in the contract your contract could be void at this time.

The disposition of the buyer's earnest money should be addressed somewhere in the contract.

I believe you can probably put your property back on the market at this point if you want to.



------------------
Jim Lee, CRS, ABR, GRI, e-PRO
Realty Executives Associates
Knoxville, Tennessee
http://www.KnoxvilleMLS.com
Jim@KnoxvilleMLS.com
1999 REALTOR of the year, Knoxville Association of REALTORS

I am not an attorney, I am not your attorney, and I am not giving you any legal advice. This response is only given for informational purposes and should not be construed or substituted for legal advice.

This is such a rotten situation for everyone. I'm just so sad. Do real estate deals go this badly often?


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Most of the millions of real estate transactions that occur annually in the US go very smoothly; like most things you only hear about the bad ones especially if you're involved in it.

In your case an unforseen circumstance, the pending assessment on your condo, caused the mortgage company to deny your buyer the loan he or she applied for.

I'm still amazed there is no provision for your buyer to cancel the contract in case of failure to secure financing.

------------------
Jim Lee, CRS, ABR, GRI, e-PRO
Realty Executives Associates
Knoxville, Tennessee
http://www.KnoxvilleMLS.com
Jim@KnoxvilleMLS.com
1999 REALTOR of the year, Knoxville Association of REALTORS

I am not an attorney, I am not your attorney, and I am not giving you any legal advice. This response is only given for informational purposes and should not be construed or substituted for legal advice.