Interest rate hike puts house purchase in jeopardy
Dear Mr. Feichthaler:
I made an offer on a house back in March and it was accepted. The closing date is scheduled for Sept. 2. I did not have a rate lock so the interest rate is much, much higher, making it impossible for us to proceed financially. Can we get out of the contract?
-Audrey A.
Dear Audrey:
The Federal Reserve decisions on tightening money supply to control inflation has led to a substantial increase in interest rates in a short period of time. We were still handling refinance transactions under 3% this year at the firm, where the typical rate now is approaching 6%. With that increase, the monthly payments our clients face have gone up substantially where a rate lock was not obtained.
Many questions lead, first, to a review of the contract. What does it say regarding your due diligence, or inspection, period? This is the time where a buyer can cancel, typically for any reason. Also, what does your contract say about financing contingency? The standard form contract typically used has confusing wording which may lead one to believe that, if you can’t get financing, then you don’t need to proceed with the contract. However, what it generally says is, if you get a loan commitment from the bank, that meets the requirement to “obtain financing.” Moreover, if you are unable to obtain a loan commitment, and do not inform the seller of this fact within a certain time, you may have waived your right to cancel the contract to purchase. There may be other contractual obligations unmet by your seller, which may allow for an exit from the contract.
Personally, I always look for the path of least resistance. I would approach the seller and request you be released from the contract, which the seller may be willing to do for a variety of reasons. If that fails, you may want to consider offering them to keep a portion of the escrow deposit you likely made. If you are not comfortable with this approach, or are unsure of your rights and obligations under the contract, contacting an attorney is advisable.
Eric P. Feichthaler has lived in Cape Coral for over 35 years and graduated from Mariner High School in Cape Coral. After completing law school at Georgetown University in Washington, D.C., he returned to Southwest Florida to practice law and raise a family. He served as mayor of Cape Coral from 2005-2008, and continues his service to the community through the Cape Coral Caring Center, Cape Coral Museum of History, and Cape Coral Kiwanis. He has been married to his wife, Mary, for over 20 years, and they have four children together. He earned his board certification in Real Estate Law from the Florida Bar. He is AV Preeminent rated by Martindale-Hubbell for professional ethics and legal ability, and is a Supreme Court Certified Circuit Civil Mediator. He can be reached at eric@capecoralattorney.com, or 239-542-4733.
This article is general in nature and not intended as legal advice to anyone. Individuals should seek legal counsel before acting on any matter of legal rights and obligations.
To reach ERIC P. FEICHTHALER, please email news@breezenewspapers.com