I am under contract for a mobile home park in Iowa right now and the bank withdrew from financing the property 2 days before closing. They had already told me we were good to go and I removed the financing contingency because of this. I was told by the lender and the senior loan officer at the bank that we were good to go.
Now they are backing out and I will lose the $20k deposit because of their actions. Is there anything I can do? Can I come after the bank for losing the deposit?
I hate that for you. If you have an unconditional loan approval and lender commitment, you might have grounds. I suspect that any loan approval or lender commitment is conditional, as not to obligate them, if they choose not to fund the deal.
The only hope is that some other conditions or contingency exists, in your contract, that you can legitimately exercise.
It’s a reminder to me - since I had it happen 30 years ago on a real estate deal - not to release the financing contingency without having unconditional letter of loan approved for the lender. At least then I can pursue the bank for breach and attempt to recover my deposit.
I would try to find a new lender and get the deal done. You have to make an effort to mitigate your loss.
If you end up losing the deal and your deposit, you then must decide if it’s worth the time, effort, and money to go after the bank. You may end up spending another $20-40k and 2-3 years of your time trying to get back the $20k. You also have to understand that Commercial Real Estate is not the same as buying a primary residence. A court/Judge will consider you a well educated investor and therefore hold you to a higher standard than Jane and John Doe buying their primary residence.
Send me an email at patrick@schpropertiesllc.com with the details of the property. We might be able to help and if we are we can move quickly. Either way I would ask for an extension with your seller. Good luck otherwise.
@SDGuy and others, does the 3-day TIL clause apply in this situation? Or is that only for primary residence transactions?
Further, @LandonCapitalGroup I’m wondering why you removed the financing clause days prior to closing? We typically dont modify our contracts that close to close date. Did seller ask you to do so? For me, this would be an odd request
Yep I agree. It is not worth going after them so I am going to just have to eat the cost. I will be talking with my attorney though to see if there are any other options.
I would be interested to know if the TIL clause applies to this.
I removed the financing contingency because I was told by the lender we were good to go and I negotiated a seller credit and cap ex with the seller but he said if we did we would have to waive contingencies and close two weeks before we previously anticipated. I double checked with the bank that we were good to go and they said yes so I went forward with it. Obviously that backfired and I learned my lesson.
So yes, the seller requested to close early if I wanted the seller credit and then the bank pulled out. It was also the Seller’s referral to the bank. Maybe some sort of collusion there? I doubt it but it is a possibility.
Truth in Lending ACT, AKA Reg Z, only applies to consumers loans.
"The Truth in Lending Act is intended to ensure that credit terms are disclosed in a meaningful way to consumers, so they can better compare lending options. In recent years, California, New York, Utah, and Virginia have enacted laws that require lenders to include disclosures in their commercial financing transactions with businesses. Commercial financing transactions are not covered by the federal Truth in Lending Act.
In 2022, the CFPB received a request from an industry trade association to determine whether New York’s commercial financing disclosure law is preempted by the Truth in Lending Act. After carefully considering the request, the CFPB’s preliminary determination was that the New York law is not preempted by the Truth in Lending Act because the New York law regulates commercial financing transactions rather than consumer-purpose transactions. "