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Help! Home buying situation/need to pull out!?!

Home Mortgages and Home Buying Help! Home buying situation/need to pull out!?!

  • Avatar Stranded2x 
    Participant
    Status: Physician
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    Joined: 04/07/2018
    Earnest refinancing bonus

    Hi folks–

    Need some sage advice:

    Wife and I (finally!) placed offer on a home and it was accepted (live in VHCOL area).  House is upper end of 3X income–but that’s the norm here to get a liveable place.  We pulled the inspection contingencies already (pretty clean report) and the loan contingency is due to be removed next Wednesday.

     

    Today, I had a VERY disturbing conversation with my boss who knows we’re trying to buy a house:  in brief, he told me there is a 60% chance our medical group will be filing for bankruptcy in the next 3 months and said this isn’t public info yet but he wanted to “help me out.”

     

    Questions:

    1) Would anybody proceed with purchase of home?  Our emergency fund will be only 4 months after all is said and done if we proceed.

    2) How do we terminate this deal “cleanly” so we get our earnest money deposit back using the mortgage contingency?  Our loan is “approved” and my real estate agent knows that.  Obviously since we may be in financial limbo for a while our deposit is many tens of thousands of dollars which we will need.

    3) Since there’s only a 60% chance of bankruptcy, there is a 40% chance that we’ll be ok but it could take 3-4 months to know for sure.  In that situation we’d like to continue with another home purchase down the road.  I am worried that if I tell the bank that my group may be going into bankruptcy (in order to back out of this deal using the loan contingency), then down the road it may flag us negatively should we want to buy a house.   Do we have to give anybody (ie my agent, sellers agent, loan officer, escrow company) a reason we’re not going to remove the loan contingency and walk away (and also receive our deposit back)?

    THANKS FOR YOUR ADVICE!

     

     

     

    #193158 Reply
    ENT Doc ENT Doc 
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    Status: Physician
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    Joined: 01/14/2017

    I would tell the bank which would likely prevent the loan contingency from being lifted, no? Get out of that home purchase immediately.

    Start looking for another job. Now.

    Find out more about what’s going on with your group. Look at the finances and find out why your boss would say that. But no way in hell do I let the bank think I’m a solid borrower. That’s a dangerous amount of fixed expenses at too high a probability for me to take on. And even if they don’t go bankrupt I’d start looking elsewhere. Any place that would be teetering on the edge like that isn’t worth sticking around for, especially since they seem to keep you in the dark.

    Avatar DCdoc 
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    Status: Physician
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    Joined: 06/14/2016

    How much was your earnest deposit? Hinting that the mortgage broker should pull the mortgage for a rumor is tough. You could be sued by the seller and possibly the agent (certainly buyers agent) for a lost commission. He should have given you this info before contingency period ended. Are you prepared to lose the deposit? No easy answer in this situation. I’m sorry this is happening to you.

    #193162 Reply
    Liked by ENT Doc
    ENT Doc ENT Doc 
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    Get the boss to put this in writing and send it to your loan officer.

    #193163 Reply
    Avatar DCdoc 
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    Joined: 06/14/2016

    I see you wrote 10s of thousands. That might seem like a lot now, but it isn’t in the big picture. You’re stretching your income to buy this. Does spouse work? If I were you I would walk away, expecting to lose the deposit. The sellers will have unexpected expenses if you pull out as well. That’s why the deposit exists – to compensate a seller if a buyer pulls out for any reason aside from a contingency.

    #193164 Reply
    Liked by Zaphod, q-school
    portlandia portlandia 
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    Status: Physician
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    Joined: 07/07/2017

    Agree with ENTDoc. Tell the lender that you have been told you are likely losing your job. No way does the lender proceed with the loan in that situation. As long as the financing contingency is still in place, you should receive your earnest money back.

    Good luck. Please let us know how it turns out.

    #193166 Reply
    Liked by hatton1, MPMD, ENT Doc
    Avatar octopus85 
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    Status: Resident
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    Joined: 08/13/2017

    You need to go thank your boss for doing something that is probably quite detrimental to him (causing you to start looking for a new job) but saving your skin, in the process.

     

    You should get a copy of the purchase agreement and read it carefully for the exact verbiage, but generally, the financing contingency is worded something like, “Buyers will obtain satisfactory loan commitment…”. So, you can simply decide that the loan options available to you are not “satisfactory” and unilaterally cancel the deal and get your earnest money back. You likely do not need to tell your bank (nor your buyer’s agent) the specifics. “Something significant changed and we are temporarily pausing to re-assess our home purchase plans”.

     

    This is a fantastic example of why it’s unwise to overextend yourself on housing, no matter how much you might be choosing to rationalize to yourself that it’s the “norm” or required to find someplace “livable”.

    #193167 Reply
    Avatar DCdoc 
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    No way the chief guy puts that in writing. That would open the floodgates. Every other employee would immediately start looking for a new job. That would ensure bankruptsy.

    #193168 Reply
    MPMD MPMD 
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    Joined: 05/01/2017

    Can you just get a conference call going with your real estate agent and mortgage broker in confidence?

    I am not an expert on how earnest money works. If you have already told them you have passed the mortgage contingency you might think about an offer of some small percentage of your earnest money as a show of good faith to the seller. You might look at that as money well spent for a clean exit from a sticky situation. I’m imagining your agent goes to their agent and says something like “something really weird has come up and this is going to fall through, can we offer you $1k of earnest money (or whatever) just to let us move on?” My understanding of earnest money is that it is party there to compensate the sellers for lost time when things like this happen. I would rather offer a good faith amount than start fighting over tens of thousands.

    I wouldn’t go trying to get your boss to put things in writing, they aren’t going to do that or if they are that’s… weird.

     

    #193170 Reply
    Avatar octopus85 
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    The other advice to disclose the details of this is extremely foolish.

    For all you know, the loan officer’s brother is a vendor to the medical group and is owed money…now he finds out about the impending bankruptcy and tries to get paid, first. Then someone else hears, etc. Then all the other docs start quitting because they don’t want to be last, etc.

    You were given an enormous gift by the “boss” – don’t smack him in the face with it.

     

    Read the verbiage of the actual sales contract. What, specifically, does the financing contingency say? If it says something like “satisfactory conditions”, then, well, you only need to assert that the conditions are not “satisfactory” to you. You were looking for a rate of 1.4%, right? Dang. Wasn’t available. Guess you get to pull out.

    I know that sounds shady, but that’s how it works. In many states, the “standard” real estate buy/sell contract is notorious for giving the buyers ample opportunities to back out.

    #193171 Reply
    Liked by Zaphod, MPMD, adventure
    portlandia portlandia 
    Participant
    Status: Physician
    Posts: 401
    Joined: 07/07/2017

    The other advice to disclose the details of this is extremely foolish.

    For all you know, the loan officer’s brother is a vendor to the medical group and is owed money…now he finds out about the impending bankruptcy and tries to get paid, first. Then someone else hears, etc. Then all the other docs start quitting because they don’t want to be last, etc.

    You were given an enormous gift by the “boss” – don’t smack him in the face with it.

     

    Read the verbiage of the actual sales contract. What, specifically, does the financing contingency say? If it says something like “satisfactory conditions”, then, well, you only need to assert that the conditions are not “satisfactory” to you. You were looking for a rate of 1.4%, right? Dang. Wasn’t available. Guess you get to pull out.

    I know that sounds shady, but that’s how it works. In many states, the “standard” real estate buy/sell contract is notorious for giving the buyers ample opportunities to back out.

    Click to expand…

    I’m not sure that just saying “I didn’t find financing to my liking” would pass muster. Of course it all depends on the contract, but the contracts that I have entered into have not had any language that would allow for this. The inspection period is the time you can pull out for any reason. If you don’t do your due diligence in obtaining financing, the seller could ask for your earnest money as compensation for failure to perform.

    I wouldn’t worry about word getting out about the medical group. The lender has a professional obligation to not go blabbing your financial life all over the office or internet for that matter. Tell the lender you might be laid off soon and the loan falls through. You don’t have to go into all the details about the impending bankruptcy. Also, most lenders have you sign paper work early in the loan process stating that if anything in your financial life changes, you are to notify them immediately.

    #193174 Reply
    Liked by Hank
    Avatar DCdoc 
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    I still think you eat the deposit and consider it money well spent to avoid a potentially troubling situation like foreclosure. I would walk away and forfeit the money, assuming it’s 20-25k like our home purchases have been. I know others disagree. But it seems like everyone is in agreement you shouldn’t buy the house given this new info.

    #193176 Reply
    CordMcNally CordMcNally 
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    Joined: 01/03/2017

    Your boss did you quite the solid. In bankruptcy, you either file for bankruptcy or you don’t. With him even mentioning that, I bet your group is heading towards it. I definitely wouldn’t proceed with the purchase and I also wouldn’t give up any information about a possible bankruptcy since your boss told you in confidence and, honestly, did you a huge favor.

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    #193177 Reply
    q-school q-school 
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    Joined: 05/07/2017

    We had a buyer try to pull out last day. That’s when I was grateful to have an experienced lawyer and realtor. They basically said go ahead but know that we sue.

    Buyer went ahead with purchase. I was at work all day and didn’t have time to deal with that crap.

    Agree with dcdoc. Especially if it’s a hot market the loss of the earnest money will likely mollify them and they can sell it again easily. Different if difficult to sell.

    I guess you could resign and tell lender you are no longer employed. That would likely make them cancel your financing.

    Of course if you aren’t moving and just switching groups and love the house, maybe buy the house anyways. It’s hard to make decisions during stressful period.

    Good luck!

    #193183 Reply
    ENT Doc ENT Doc 
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    I don’t understand why people think the boss did him a solid or that he owes his boss anything. His boss, if anything, sounds like he kept things from the group or the OP. Being 3 months away from bankruptcy and not saying anything is a dick move. Screw him. You don’t owe him or anyone anything except you and your wife (and family). Protect yourself, get out of that job, and use this information if possible to back the heck out of the loan.

    Unless the “boss” is the only one with all the financial information in this group it’s silly to think that others don’t know and aren’t making their own exit plans.

    #193184 Reply
    Liked by Zaphod, MPMD

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