For part two of my new home construction contracts analysis, I thought I’d add financing information;
Who do I have to use for my loan?
“If one or more loan amounts are set forth in Section 3, then this contract is contingent upon Purchaser obtaining one or more commitments… at the prevailing rate of interest in Charlottesville, VA. If purchaser receives such commitment for the financing… Purchaser agrees to accept the same.”
“If Purchaser’s application for financing is not approved in 45 days, Seller may ‘submit another applications on substantially the same terms to a lender chosen by the Seller… and if such applications results in the issuance of a loan commitment… Purchaser shall be bound to accept such commitment.”
“Purchaser is required to complete a Mortgage Application with the Seller’s preferred lender, Countrywide Home Loans.”
What happens to my earnest money deposit?
While the Virginia Association of Realtors’ Standard contract provides for the earnest money deposit to be held in escrow until closing, this is not always the case with non-standard contracts. Here is a paragraph that is in 2 contracts that we see quite often here in Charlottesville.
“If the escrow agent is the SELLER, the DEPOSIT need not be kept separately (i.e. in escrow) but may be used in SELLER’s business.”
This should be a major red flag with so many builders currently in financial trouble- it essentially means that it can be used for whatever that builder deems necessary in the course of business, but doesn’t provide the buyer much protection in the case that a builder goes out of business.