Residential Real Estate Purchase and Sale Contract- Buyer Beware
Is it important to understand your contract in connection with your residential real estate purchase? Consider the case of Florida Investment Group v. Lafont, 271 So. 3d 1 (Fla. 4DCA 2019). In Lafont, the Buyer had a financing contingency which stated that the contract was subject to the Buyer obtaining a conventional fixed rate loan for a term of 30 years. The contract required the Buyer to use good faith efforts to obtain “Loan Approval”. In the event the Buyer was not able to obtain Loan Approval, the Buyer had until expiration of the loan approval period to waive the loan approval or terminate the contract. The Buyer did obtain approval for “a loan” but not the loan specified in the financing contingency. When the property appraised for $135,000 less than the purchase price, the Buyer sought to terminate the contract and receive return of her $62,000 deposit. Although the trial court ruled for the Buyer, the appellate court reversed. Because the loan which was approved was not “the loan” specified in the financing contingency and the Buyer did not elect to terminate the contract timely, the Buyer was required to honor the contract. Because the standard contract had an attorney’s fee provision, the Buyer was also required to pay the Seller’s attorney’s fees incurred in the litigation.
How might this extremely unfortunate situation have been avoided? First, the Buyer could have made the offer subject to the property appraising at not less than the purchase price (the “Appraisal Contingency”). Alternatively, the Buyer could have given the proper notice upon the failure to obtain the financing, as specified in the contract, at which time the parties could have negotiated a resolution. The lesson here is that it is important to understand the terms of the contract, especially when the end result may be as serious as it was for poor Ms. Lafont.