Legal Question in Real Estate Law in Ohio

Financing was changed 2 days before closing, can I cancel Contract

Purchased a home in August. Required financing approval within 14 days, which was done. Loan was based on a first mortgage (38K) and a second mortgage (131K). Current residence has not sold.

Two Days before closing I find out the loan values have been changed to a first mortgage of (38k) but the second was reduced to (112k). Can I cancel the contract to purchase home

Asked on 10/29/03, 6:49 pm

2 Answers from Attorneys

Joseph Burke Law Office of Joseph T. Burke

Re: Financing was changed 2 days before closing, can I cancel Contract

It may or may not be a sufficient basis to rescind the contract, depends on contingency language in the contract and whether you signed off on financing contingency. I would contact an attorney. I can be reached at (440) 835-8200.

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Answered on 10/30/03, 9:36 am

Steven Martinek Steven Martinek Lawyer Ltd.

Re: Financing was changed 2 days before closing, can I cancel Contract

The fact pattern, on first reading, appears ambiguous and confusing. On what basis has the lending institution reduced the principal of the second mortgae ( has your income changed?; did the house appraise low?). Your goal is not clear to me. Are you looking for a basis to escape the purchase because your current home hasn't sold? Or, are you seeking advice to compel the lending institution to comply with the earlier commitment? The change in financing terms seems significant and material. If the change is not attributable to your conduct it may provide a basis upon which to rescind the contract. You should anticipate a battle over your earnest money. If you are seeking leverage to compel the lending institution to provide the original financing, I would advise the escrow agent to delay closing and inform the realtor of this development, explaining your inability to proceed unless the original financing structure is re-established. Perhaps the seller will accept a note and a third mortgage for part of the price. You need to retain counsel. The action by the bank indicates a downward revision in confidence in your ability to pay the mortgages. You would be well-advised to give due consideration, perhaps deference, to such an assessment by the financial professionals. It may be more prudent to bail out, even at the risk of losing your earnest money, rather than to close on a deal you may not be able to fulfill. Good luck.

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Answered on 10/30/03, 10:43 am

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