Postponing your sale or losing your deposit
Anyone who has lost their job may no longer qualify for a mortgage. This would “kill any deal requiring financing,” says Jed Lewin, a broker with Triplemint. If you are a buyer who has seen your income slashed as a result of the pandemic, it may affect not only your mortgage but your post-closing liquidity.
Martin Eiden, a broker at Compass, says he is seeing buyers ask if they can postpone their closings “indefinitely until things settle down.”
Most banks are going to ask for updated financials just before clearing the loans to close says Elizabeth Kee, a broker with CORE.
“All letters of commitment have a contingency clause that says if there is a change in the borrower’s finances, they can refuse to lend to any borrower whose financial picture has changed—and whose hasn’t?” she asks.
Eiden points out New York courts generally hold that both sides are entitled to a reasonable adjournment of 30 days, taking into account all circumstances. Buyers can likely argue that the Covid-19 circumstances lengthen that timeframe.
A board application typically cannot be submitted without the letter of commitment, so anyone who is to the point of receiving board approval will no longer have any financing contingency says Kee. “We might see some buyers who cannot close losing their escrow deposits. If so, we are going to see a lot of buyers in court, trying to get their deposits back,” she says.
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