Liquidated Damages?

Question

My fiance was in the process of selling a piece of income property, and he and the buyer had initial for liquidated damages. Well, there was a financing contingency and the requirement that the buyer submit proof of pre-approval. His agent repeatedly asked this information of the Buyer's agent, and it was always "I'll send it right over!" Never got it; then the buyer wanted to renegotiate the sales price. My fiance hit the roof. Bottom line, the contingency wasn't released, the bank would never return calls when we inquired about the loan status. The the Buyer said "the property didn't qualify for the loan." and he wants to cancel. He sent a letter to the closer and some form requesting the seller to "perform" and sign the cancellation. My fiance has refused. Has this happened to anyone? What did you do?

The closer never got anything in writing about the loan being denied, nor were her phone calls returned. My fiance had an appraisal done before he listed the property to assure that he was withn range on the asking price.

Answer 1

The buyer will have to provide a copy of the loan denial letter to the closing agent. With that, and the contingency clause, the deal will be officially dead. If the buyer fails to deliver the loan denial letter then the seller is entitled to any specified liquidated damages, usually the earnest money paid by the buyer.

The mortgage lender is not required to have any contact with the seller regarding the status of the loan and may well be legally barred from discussing it with the seller. The lender will provide written proof of the loan denial to the buyer who then must turn it over to the closing agent.

Answer 2

If the financing requirement was part of the contract (written) then the buyer does have the right to back out. Check with the bank (in person) to confirm that the loan was denied. If it wasn't (or there's something here I don't know) then check his financial status before you purse a lawsuit. Winning a judgment is useless if he you can't collect. Is there some reason that he wishes to purse this that would involve not being able to get another buyer? If the property was denied for a loan because it's useless for some reason, then he's likely not libel.
Is he re-negotiating based on a survey that showed the property value was less than he originally thought? I'd need more information before I could say for sure whether it's pursuable by action.