1. Free Legal Help, Legal Forms and Lawyers. TheLaw.com has been providing free legal assistance online since 1995. Our most popular destinations for legal help are below. It only takes a minute to join our legal community!

    Dismiss Notice

What is a "loan commitment"?

Discussion in 'Buying & Selling a Home or Residence' started by Cody Farkas, Jul 28, 2019.

  1. Cody Farkas

    Cody Farkas Law Topic Starter New Member

    Messages:
    4
    Likes Received:
    0
    Trophy Points:
    1
    Jurisdiction:
    Ohio

    Brief backstory


    Entered into a contract to purchase a residential property. Seller is claiming that they are voiding the contract due to failure to meet the "financing contingency", which states:

    We provided an approval letter to the seller's agent on 07/16/2019. This was not pre-approval; it was an approval letter contingent only on appraisal, which states:

    We believe that the approval letter sent to the seller's agent on 07/16/2019 satisfies the financing contingency and that the seller has no cause to void the contract. Ohio Revised Code 1322.01-U defines the term "loan commitment":

    So, is the approval letter a "loan commitment"? Does the seller have cause to void the contract? We're very confused. We have already consulted with an attorney and will be reviewing the contract and timelines in detail on Monday but I would like to be as prepared as possible with any other information I can find before then.
     
  2. adjusterjack

    adjusterjack Super Moderator

    Messages:
    9,431
    Likes Received:
    3,111
    Trophy Points:
    113

    Sorry, but an approval with a contingency is not a commitment.

    The lender can decline the loan based on the results of the appraisal.

    You should have gotten the appraisal and final approval by the lender by 7/22.

    What's the status of the appraisal at this point?

    And what does

    mean?

    Has he written a letter cancelling the sale? Is he just talking? Something else? Claiming is a far cry from doing.
     
  3. Cody Farkas

    Cody Farkas Law Topic Starter New Member

    Messages:
    4
    Likes Received:
    0
    Trophy Points:
    1
    If an approval with a contingency is not a commitment, why does the approval letter state a "commitment expiration" date?

    The seller's agent sent us a mutual release with an addendum. They are attempting to cancel the sale.

    Can't the lender decline the loan at any time before the funds are actually dispersed for a variety of reasons?

    The appraisal was completed and we received a third approval letter on 7/23/2019. Everything was done as promptly as possible; the contract was signed on 7/13 and we completed our mortgage application and the lender ordered the appraisal on the same day.

    A few notes:
    1. The date in the contract, 7/22/2019, appears to be an error. The contract was amended after negotiation, it was supposed to be 10 days following the day the contract was signed, but the amended contract was not actually signed until 7/13. Note that the first part of the financing contingency states "within ten (10) days".
    2. In Watson v. Gerace, 05-1296 (3rd Cir. 2006), it was found that a mortgage approval document with contingencies (in this case it was really a pre-approval, as it was contingent upon both credit review and appraisal) satisfied the financing contingency clause.

    I am also not sure how an approval with a contingency on appraisal is not a "loan commitment" when the Ohio Revised Code specifically states that a "loan commitment" may have conditions?
     
  4. PayrollHRGuy

    PayrollHRGuy Well-Known Member

    Messages:
    1,478
    Likes Received:
    729
    Trophy Points:
    113

    What was the date of the purchase contract and did your "order the appraisal" within 10 days of that date?
     
  5. Cody Farkas

    Cody Farkas Law Topic Starter New Member

    Messages:
    4
    Likes Received:
    0
    Trophy Points:
    1
    The original date of the purchase agreement was 7/11/2019. It was amended after negotiation and signed again on 7/13/2019.

    The appraisal document we have in our possession has the "date of inspection and effective date" listed as 7/16/2019 and the document was delivered to us by the lender on 7/23/2019.
     
  6. adjusterjack

    adjusterjack Super Moderator

    Messages:
    9,431
    Likes Received:
    3,111
    Trophy Points:
    113

    You're splitting hairs. It's just as much a commitment as your contract to purchase the house contingent on getting the loan and a few other things. Your lender has a way out, you have a way out. Same thing.

    Then you already have your answer, what do you want from us?

    So, don't sign it. Write back that the due date for the approval was the 23d and you are ready to go through with the purchase.
     
  7. Cody Farkas

    Cody Farkas Law Topic Starter New Member

    Messages:
    4
    Likes Received:
    0
    Trophy Points:
    1
    I'm not splitting hairs. Your second sentence there is precisely my point: a loan commitment with conditions is still a loan commitment.

    As for what I "want from you", I'm not sure what you mean. The cited decision was not in Ohio. I am looking for someone familiar specifically with real estate and/or contract law in Ohio who can provide an informed opinion as to whether the approval letter is in fact a commitment, or whether the appraisal being completed on 7/16 effectively satisfied the financing contingency, or perhaps something I'm not thinking of.

    We have not signed anything. We are proceeding with our lender as though the contract is still binding, per our realtor and his broker. We are meeting with an attorney tomorrow to review. Until then, I'm just gathering information and looking for advice and opinions.
     
  8. adjusterjack

    adjusterjack Super Moderator

    Messages:
    9,431
    Likes Received:
    3,111
    Trophy Points:
    113

    Good. Rely on your attorney. He'll be able to figure out your situation a lot better than we will.
     

Share This Page