Couple tries to live beyond their means, banks say no and Toll keeps their $93k

[mkg265 2]

Maybe now the couple will start to look at the 175K 4 bedroom, 2 bath homes in the Bronx that are under foreclosure before trying to move to another upper class oasis.

I do feel sorry for them through.

That's a smarter way. If I was in a different situation like theirs, I would preferably move to the bronx. I'd buy an old Honda Civic with rusted exterior, and tailpipe to blend in. Living there isn't so bad after you blend in.

Bronx is looking up my friend!! That and my home would never be broken into because I would have the protection of the Albanian Mafia.

[w¡n9Nµ7 §£@¥€r 123]

They had a deal; if the bank changed the terms of the deal (which is what saying "we need a bigger downpayment" means), normally that's a point at which all parties can say "the terms have changed, thanks, but no thanks."

They had a prequal. A prequal isn't a deal. Deals occur at closing.

[mkg265 2]

They had a deal; if the bank changed the terms of the deal (which is what saying "we need a bigger downpayment" means), normally that's a point at which all parties can say "the terms have changed, thanks, but no thanks."

They had a prequal. A prequal isn't a deal. Deals occur at closing.

There's so much I don't know about home buying...

[I AM NOT THAT GUY 5,715]

Elizabeth and James Pham put all their savings into the deposit they made on a $956,990 two-bedroom apartment at Maxwell Place, a new development in Hoboken, N.J.

They signed an agreement for the apartment in 2005, put down $93,199 and were preapproved for a mortgage for the rest of the purchase price.

But when their closing date arrived last September, several banks told them that to get a mortgage, they would have to increase their 10 percent down payment by another 15 to 25 percentage points. With no way to come up with that much money, the Phams notified the developer, Toll Brothers, that they could not get financing for the apartment. Toll Brothers declared them in default and kept their deposit.

“It would take us another 15 years to save that money again,” Ms. Pham said.

There are two seperate things going on here.

First, from the way I read this, and this is not that different from other development communites, all the units are sold prior to construction. What you buy is a reservation, an intent to buy, and that reservation, or deposit, is refundable up until a drop dead date. That is the $93K they lost. Perhaps to qualify, they had to show they could qualify for a loan for the final purchase price. In 2005 anybody could qualify for almost any size loan, which is why we are in the current mess. However, there is not a bank in the world that will give you a loan lock for three years! Not then, not now!

Finally, it is now September 2008, and banks are now requiring fully documented loans, and the couple can't qualify without putting down a larger down payment. This is why we are seeing so many folks trying to fudge the paperwork, by over reporting their income, and presenting fake ITR's.

Edited March 23, 2009 by Mister_Bill

[fozzie 41]

Seems scandalous to me! How can you be expected to put down 93K without being approved for the mortgage! I just wouldn't do it, its too great a risk. At least they should be held to the prequal deal as they know that people then place a down payment on the strength of that.

I would definitely seek compensation from the bank. However I know not enough about buying a home in this country, although we are thinking seriously about buying. Stories like this alert homebuyers to the risks involved.

And why is (almost) everyone bashing the couple for trying to buy their dream home? 10% down payments are the norm in most places (NY is around 20%). How many of us have 90K in savings? Not many i bet.

Edited March 23, 2009 by fozzie

[w¡n9Nµ7 §£@¥€r 123]

Can you imagine losing a $250,000 deposit?

[w¡n9Nµ7 §£@¥€r 123]

And why is (almost) everyone bashing the couple for trying to buy their dream home? 10% down payments are the norm in most places (NY is around 20%). How many of us have 90K in savings? Not many i bet.

No one with only 90k in savings should be dreaming of living on the water in Hoboken. People with that kind of money belong in South Brunswick

[Caladan 19]

They had a deal; if the bank changed the terms of the deal (which is what saying "we need a bigger downpayment" means), normally that's a point at which all parties can say "the terms have changed, thanks, but no thanks."

They had a prequal. A prequal isn't a deal. Deals occur at closing.

But if it was just a pre-qual, then there's no deal, and their money should be returned.

[justashooter 430]

stupid is as stupid does.

[NickD 203]

The key word in any real estate contract is CONTINGENCY.

If this couple was too dumb to have their deposit protected by a contingency on getting a loan, that is their fault.

More than likely, their contract reads forfeiture of their deposit if they fail to follow through with the final purchase, anyone would be complete idiot to sign a contract like that. Always unknown reasons even with good intent.

Assume is yet another dirty word. Assuming all would work out.

So we can debate this all day, but without reading the contract, only guessing.

[Caladan 19]

The thing is, in the long run, the tighter lending standards are good for everyone. It's just that being caught in the middle (preapproved under one standard, denied under another) has got to suck. In 2005, 10% down was (probably wrongly) considered responsible.

[Niels Bohr 72]

The thing is, in the long run, the tighter lending standards are good for everyone. It's just that being caught in the middle (preapproved under one standard, denied under another) has got to suck. In 2005, 10% down was (probably wrongly) considered responsible.

I'd agree. I would 30% down would be good.

[NickD 203]

The thing is, in the long run, the tighter lending standards are good for everyone. It's just that being caught in the middle (preapproved under one standard, denied under another) has got to suck. In 2005, 10% down was (probably wrongly) considered responsible.

I'd agree. I would 30% down would be good.

Another old rule that left the books, the amount of principle you could borrow was not to exceed two years of your verified gross income. But back then, you could buy a very nice home for that kind of money. The escalation on home prices today, especially with the ####### they are using to toss them together is outrageous to say the least.

One factor is inflation, tax assessor increases the value of your home each year by inflation so the actual value is increasing at a compound rate. If inflation was 6% the year before and 6% the following year, not only paying taxes on the the two year old value, but on that 6% increase in inflation.

Consumers put up with this, and as long as they do, we are helpless.

Living next to a vacant lot, owner is trying to sell it at over twice the assessed value as it's the last wooded lot in the neighborhood. If he does, the value of my property would also be more than doubled, and my property taxes would skyrocket.

[missmissy 38]

Fine print though should not give a company the right to rob someone of their money, IMO. This is where individual rights vs. the rights of the business clash. I disagree with the concept that a contractual agreement can trump someone's rights or that someone can just willfully sign their rights away.

This has me curious. I'll try to find any court rulings on refund of deposit money.

This is where under English law you can put a "Subject to Finance" clause and they (the couple) would receive their deposit back. Even then, under English law the courts have the final say regardless of what is written in a contract or how long it is.

I agree with you though. It's a little ridiculous to expect someone who cannot obtain finance to lose their deposit. Naturally, it would be a different story if they simply decided to change their mind and that was the reason the deal fell through.

California tends to protect consumers more in situations like this.

Most buyer contracts contain a "contingent upon buyer receiving satisfactory financing" clause. What they are speaking about in the article is Earnest Money which is typically refundable if the buyer cannot achieve financing. I think that is the main subject of this story....or it should be. How can the developer keep the buyers earnest money if they cannot get a mortgage?

[Heracles 417]

Most buyer contracts contain a "contingent upon buyer receiving satisfactory financing" clause. What they are speaking about in the article is Earnest Money which is typically refundable if the buyer cannot achieve financing. I think that is the main subject of this story....or it should be. How can the developer keep the buyers earnest money if they cannot get a mortgage?

Exactly. Something quite illegal in a lot of other places overseas. It's just amazing the the United States legal system allows companies / contracts to sign peoples lives away. Where is the government legislation protecting the consumer? Protecting 'we the people'.

It's this sort of dodgy dealings that got us into the mess. Yet the banks are the scapegoat. The builders, Realtors and property flippers had a lot to do with this financial meltdown yet managed to go under the radar again. Even recently I know of some Realtors who were pushing bullsh-t about how the market will pick up in no time bla bla bla. Sucking innocent people in to make a commission. I had one guy trying to pull the same thing with me. I asked him when he thought the market will pick up. He said in a year for sure. So I said fair enough. If you can guarantee that and put it in writing I will buy a house. Never heard from him since.

Edited March 23, 2009 by Constellation