What is the main difference between an - Posted by TC (FL)

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What is the main difference between an - Posted by TC (FL)

Posted by TC (FL) on July 21, 2005 at 05:46:44:

approval and pre-approval letter? Does the pre-approval state “PRE”? It may seem like a dumb question but I’m dealing with a symantics issue with a buyer trying to back out. I have an approval letter from their first lender that states their loan is approved contingent on 1)appraisal, 2)clear title search and 3)proof of insurance. It’s a quick short letter that does not contain “PRE” anywhere or mention the need anything else financial to qualify.

Re: What is the main difference between an - Posted by Randy (SD)

Posted by Randy (SD) on July 21, 2005 at 12:10:45:

What do you hope to accomplish? The bottom line is you cannot force them to buy your property, the best you can hope for is to forfeit their earnest money deposit. Providing “suitable financing” was the only contingency in the offer to purchase it appears you’re entitled to retain any earnest money deposit, other than that… NEXT.

Pre-Approval vs. Commitment - Posted by JT-IN

Posted by JT-IN on July 21, 2005 at 11:52:11:


A Pre-Approval is based upon information supplied by the intended borrower. Job Status, income, and other representations made, then taken at face value by the Lender, but not yet verified. So what the Lender is saying in the Pre-Approval is that “IF” all these representations are correct, as well as other underwriting details, then we would approve the borrower for the subject loan.

A commitment letter says that the underwriting is completed, and it is only subject to the conditions listed below… Those could be an Appraisal of the subject property, re-verifying certain data, such as credit, employment, etc. These are often time what we call “Wiggle Clauses” on the part of the Lender… so if for any reason they decide to bail out on the borrower, they can contracturally do so…

Deals are NEVER closed until they are closed, and funds are deposited… (and cleared).


Re: What is the main difference between an - Posted by Phil

Posted by Phil on July 21, 2005 at 09:23:37:

Most I’ve seen say “Pre”. However you appear to have something better! AN Approval letter, of course the standard contingenties are there - which is totally normal. I can’t see how they can back out on a lender issue, they are approved.

Re: What is the main difference between an - Posted by TC (FL)

Posted by TC (FL) on July 21, 2005 at 12:14:14:

That’s exactly what I want. They want their deposit back stating they did not get loan approval. However, they did get loan approval according to my letter. But they decided to go with another lender. They won’t turn in all the paper work with the new lender and now want to bail on the deal scott-free - after dragging my sorry butt on for 7 weeks. I want their deposit!

It is better to cut bait… and fish on - Posted by JT-IN

Posted by JT-IN on July 21, 2005 at 13:02:43:


In most instnaces, you will need to pursue the potential purchaser legally if they do not willingly agree to forfeit the em deposit… In fact, by not pursuing them legally, and not refunding their deposit, this could potentially cloud the title for any new deal… You can’t have it both ways… because any litigation or possibility of same, that may effect the subject property, should be disclosed to the new buyer and any title company involved. Once they get wind of pending or potential litigation, then you lose the net buyer and title commitment too…

Unless you want to slug it out with these folks, which will cost time and money, or unless they fold willingly, the cards are stacked in their favor… Most of the court cases that I have seen on this subject also favor the buyer, unless they had a loan commited and basically walked away from the closing table. Any other fuzzy details as to the loan commitment or closing, and the facts fall in their favor.

Usually, when it goes as far as to a court case, the Judge rarely wants to be a Judge, and sides with the fact that the owner still owns the property, and can sell to another willing purchaser… so where is the harm or damage…? In every case that I have personally followed to this point, the buyer has gotten the funds returned to them, unless it was a last minute cold feet issue, and the closing was set and ready to go. It sounds like you weren’t at that point.

Just the way that I view things…


Re: It is better to cut bait… and fish on - Posted by TC (FL)

Posted by TC (FL) on July 21, 2005 at 15:02:08:

Actually, we were at that point. Closing was set for Thursday July 14. They called and asked for more time to get their NEW financing in order. BTW, this call was Tuesday - two days before closing. Then immediately went to the title company (after we agreed to a 1 week extension) to try to get the money back.

The way I figure it, I’ll take them to small claims court. It will cost me not much more than time and If I get a judgement, it will be on the credit and make it hard to buy a home in the future. I don’t think unscrupulous people should be allowed to get away with be buttheads. It makes it too easy for them to do it again to someone else. But maybe that’s just me.

Don’t try to teach a pig to sing… - Posted by Killer Joe

Posted by Killer Joe on July 21, 2005 at 16:31:44:

it’s a waste of your time, and just annoys the pig.


I agree with the other posters about not letting this situation overtake your REI objectives. All of us who play this game run into deals that just don’t pan out. It’s just part of the proccess, not the fun part, but if you are active it’s almost unavoidable.

Your situation doesn’t even come close to the last land-mine deal I walked into, I’m sure it’s the same for others here. Learn from it and move on. Spend a little more time trying to save this deal if you feel you have to, but don’t trade the time you could be moving ahead on your next deal trying to teach this pig to sing.


Re: It is better to cut bait… and fish on - Posted by Bill H

Posted by Bill H on July 21, 2005 at 16:18:20:

Don’t be surprised if the judge slaps your hands…JT-IN has posted almost verbatim exactly what will happen.

What has been your damage other than the loss of 7 weeks and some frustration?

Give it up…better now …than later.

Been there…done that.

Good Luck,
Bill H

Re: It is better to cut bait… and fish on - Posted by rm

Posted by rm on July 21, 2005 at 16:12:14:

Deals fall through all the time- this is just another day in the real estate game.

And the courts realize this.

Do you really have enough to gain by pursuing this?