Real Cases in Real Estate By Andrea Lee Negroni, Esq. – February 8th, 2012 Update

Real Cases in Real Estate By Andrea Lee Negroni, Esq. – February 8th, 2012 Update

Real Cases in Real Estate is a weekly update on real estate law, with legal principles illustrated and explained by lawsuits from around the country. The topics are wide-ranging for appeal to a broad spectrum of readers including lawyers, homeowners, investors and the general public. Andrea Lee Negroni, a Washington DC attorney and legal writer with 25 years of experience in financial services and mortgage law, contributes the case summaries.

Followers of Real Cases in Real Estate will learn and be entertained by lawsuits involving nuisance, trespass, zoning violations, deed restrictions, title insurance, public utilities, mechanics liens, construction defects, adverse possession, foreclosure and eviction, divorce and marital property rights, tenants' rights, and more. Real Cases in Real Estate uncovers the unpredictable, amusing, and sometimes outrageous disputes between next-door neighbors, contractors and homeowners, condo boards and residents, real estate brokers and homebuyers, and zoning administrators and developers.

Each fully cited case summary highlights the essential law of the case and explains the principal legal theories and concepts relevant to the outcome. Plain language treatment makes Real Cases in Real Estate accessible to lawyers and laymen alike.

Whether you follow real estate law professionally or as a hobby, you'll find something new and useful every week in Real Cases in Real Estate.

Updates for the Week of February 8th, 2012

A home purchase contract contingent on conventional financing requires the buyer to apply for financing.

The Stackhouses made a contract to buy an $885,000 home in Nebraska from a Todd Gaver, a builder. The contract was contingent on the buyers' ability to obtain an $840,000 conventional mortgage loan. The couple never applied for the loan and told the builder they weren't going to go through with the purchase. When the builder kept their $45,000 earnest money deposit, the Stackhouses sued him for its return.

The contract was fairly non-specific about the terms of the conventional loan the buyer was to obtain. For example, the interest rate, term of the loan and payment amount areas of the contract were left blank, as was the time frame for the buyers to apply for the loan. However, the contract identified five different choices for loans and the box for "conventional" loan was ticked. The would-be buyers never applied for a conventional loan. The appeals court observed that the term "conventional loan" was not defined in the purchase contract, but nevertheless concluded there is a commonly understood meaning for the term. "The term conventional financing is commonly known and understood to mean long-term financing provided by a bank, savings and loan company, mortgage company or similar organization that is in the business of loaning money for housing purchases by consumers, and such loans are evidenced by a promissory note and secured by a mortgage or deed of trust executed by the buyers in favor of the lender."

At trial, Stackhouse said he didn't apply for mortgage financing because an IPO he involved with didn't go through. He said the builder knew he could not buy the home unless the IPO was successful. However, nothing in the purchase contract mentioned the IPO. Stackhouse also claimed his application for a loan was denied, but he produced no evidence that he'd ever applied for a loan. Instead, he produced a letter from a business affiliate expressing regret that a loan could not be made to him. The letter-writer was not in the business of making home loans.

In Nebraska, a contract made contingent on financing imposes on the buyer the obligation to use good faith, bona fide efforts and reasonable diligence to obtain the financing. Or, as the court put it, "a purchaser in a land or house purchase contract that is contingent upon obtaining financing has an implied obligation to seek or apply for such financing before the lack of such financing excuses nonperformance by the purchaser."  The buyer cannot simply fail to apply for a loan, seek to escape his obligations under the contract and get a refund of his earnest money by claiming that no financing is available.

Stackhouse v. Gaver, 801 NW 2d 260, 19 Neb. App. 117 (Neb. App. 2011) [enhanced version available to subscribers].

.... subscribers can explore/search Real Estate Law resources on or access any of these Mathew Bender Real Estate Law publications:

Non-subscribers can purchase Property Law treatises/resources and Mathew Bender publications from the LexisNexis Bookstore

Non-subscribers can purchase Real Estate Law treatises/resources and Mathew Bender publications from the LexisNexis Bookstore

For more information about LexisNexis products and solutions connect with us through our corporate site.