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February 13, 2018 • Stay Connected!

QUESTION:  We represent a buyer who was pre-approved for financing at mutual acceptance. A financing contingency was included. On the 5th business day, the buyer changed lenders. Buyer made what buyer believed was a mortgage loan application for the required VA loan. At the request of the loan officer, buyer provided pay stubs, W2 and a variety of other documents.
Communication from this loan officer was poor. Phone calls and emails went mostly unanswered. She eventually sent a message to buyer saying she was sending the file to underwriting. About 2 weeks later, the loan officer informed the buyer she could not get her into any program. When we requested a copy of the adverse action notice, the loan officer refused to provide one on the grounds that buyer had never officially made application for credit. She maintained she was only looking to see if buyer qualified for various programs. Since she had not started an actual application she was unable to produce an adverse action letter.
We are now in a dispute for return of the earnest money with seller. According to the 22A, the buyer acted timely to seek financing. They believed they had started an application for a loan. Buyer believes, with the information provided to the lender, that buyer acted timely and in good faith with the conditions required under 22A. Based on buyer's good faith, shouldn't buyer recover the EM?

ANSWER:  Based on the contract language, answering this question does not require an analysis of good faith. Buyer had an obligation to make loan application, within five days of mutual acceptance. Moreover, in order to recover the EM, buyer must provide a letter to seller, consistent with the requirements of Form 22A, paragraph 5. That letter from buyer's lender must state (among other things) that loan application was made within five days of mutual acceptance and must include a copy of the "Loan Estimate" that lender was required to provide buyer following loan application. Without that letter, buyer has no claim to the EM.
If this matter goes to court and buyer argues for return of the EM, will the court be persuaded and return the EM anyway? Who knows? There is no way to predict an outcome like that. It is possible, as almost any out come is possible in litigation. It is not the outcome, however, that would be consistent with the contract language.
If buyer and seller cannot resolve, broker should advise buyer to seek legal counsel.
As an aside, this question perfectly illustrates why it is critical for brokers to do everything they can to get buyers to competent lenders. It is reasonable for sellers to refuse to give buyer a financing contingency if buyer does not contractually agree to use a competent lender for buyer's loan efforts. It is also perfectly reasonable for buyer brokers to recommend that buyers only consult and work with competent lenders. The fact that lender never generated a "loan estimate" should have been a clue to buyer and buyer's broker that loan application was not made and/or that the lender was not competent.  


The Legal Hotline Lawyer does not represent Washington REALTORS or its members. To browse through our database of past Q & A's, visit Attorney Annie Fitzsimmons writes the Legal Hotline Question and Answer of the Week. Please submit questions to . Please tell us your NRDS number when you e-mail the Hotline with your question.


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Reminder: Hirst Call is February 16th
Members are all welcome to join us for a 1-hour informational conference call on Friday, February 16th at 1:30 pm with Bill Clarke, Washington REALTORS® Director of Public Policy, who will provide an update on Hirst and answer questions live submitted via our text service. This session will last approximately an hour. If you cannot make the call we will post an audio file for you to access at  HOW TO JOIN THE CALL.
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Members Edge is Coming to Washington!
This is a wonderful opportunity for our members. NAR's Member's Edge is coming to Stevenson, WA on February 20th with a fabulous line-up of speakers. Did we mention it's in a stunning location?
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Reminder: NAR Leadership Academy
REALTOR® University is excited to present NAR's 2019 Leadership Academy. The Leadership Academy identifies, inspires and mentors emerging leaders from the local and state level for the National Association of REALTORS®. The deadline for applications is March 9, 2018. Apply today!
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3 Ways to Improve Customer Connections
(Source: REALTOR Mag) How do you create more lasting connections with customers? It may come down to becoming a better acquaintance with your client, working harder to anticipate their needs, and showing more empathy. RISMedia recently wrote about enhancing customer interactions, including:
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Member Access to the REAL Trends Newsletter
Did you know that Washington REALTORS® subscribes to REALTrends newsletters so our members can have access? You can find current and past editions here. This month's newsletter features articles with topics like: The Age of Amazon •  The Future of Brokerage • Trends: Understanding Blockchain Technology • Benchmarking: Brokerages Below-the-Line Spend • Pre-empt Disrupters and more. This is a member's only benefit so you will need your NRDS ID and password...
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Primary Mortgage Rates Survey
(updated every Thursday)  Source:  Freddie Mac
 February 8, 2018  30-yr FRM  15-Yr FRM  5/1-Yr ARM
 Average Rates  4.32%  3.77%  3.57%
 Fees & Points  0.6
 Margin  N/A  N/A  2.75

 February 1, 2018  30-yr FRM  15-Yr FRM  5/1-Yr ARM
 Average Rates  4.22%  3.68%  3.53%
 Fees & Points  0.5
 Margin  N/A  N/A  2.75

 January 25, 2018  30-yr FRM  15-Yr FRM  5/1-Yr ARM
 Average Rates  4.15%  3.62%  3.52%
 Fees & Points  0.5
 Margin  N/A  N/A  2.75

 January 18, 2018  30-yr FRM  15-Yr FRM  5/1-Yr ARM
 Average Rates  4.04%  3.49%  3.46%
 Fees & Points  0.6
 Margin  N/A  N/A  2.74

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