Contingency Mortgage LoanEventual mortgage loan
Funding eventualities and serious deposits: If I don't get my loan, I get my bond back, right?
Buyers whose contracts allow the refund of the security bond if funding is not possible must be very cautious in formulating this case in the sales agreement, otherwise a buyer may experience an involuntary shock and be compelled to lose serious cash if funding is not possible.
Usually, when a buyer needs to obtain finance from a local government institution for the acquisition of property, he makes his commitment to buy conditional on it. As part of this kind of transactions, the buyer must have access to the lender's resources at the conclusion of the agreement in order to receive the consideration. Simultaneously, when concluding a sale, a buyer usually makes part of his own cash - as a cash security - available to the vendor in order to ensure that the sale is fulfilled and also to form a possible endowment for lump-sum compensation in the case of delay by the buyer.
However, the down payment is usually refunded if the agreement is terminated through no fault of the buyer. Thus, if there is a condition of funding in a policy and the buyer does not receive that funding, it follows that a cancellation of the policy due to the loss of that condition would lead to the serious cash benefit being returned to the buyer.
A recent Triple R Development, LLC v. Golfview Apartments I, L.P. appeal tribunal in Illinois ruled that a finance option did not involve a return of the serious security to the buyer if the buyer did not find the required finance to complete. However, the Tribunal interprets the terms of the agreement as requiring only a provision of the buyer's "ability to finance" - not the collection of a financial pledge or the finance itself.
Since it found that the buyer was indeed'eligible for financing', the Tribunal found that the condition was met even though the buyer had not actually received the funding. Triple R Development Tribunal concentrated on the jargon of contingency - which did not relate to funding in general - but on "determining the buyer's eligibility" to obtain certain income taxes necessary in the context of the funding.
Though elsewhere in the Memorandum of Understanding it was noted the need for the buyer to "receive" funding in order to be able to conclude, the Tribunal decided not to combine these terms with the particular emergency terminology in order to establish a more general funding contingency.