Get lawyer to help reach settlement

Dear Benny — My wife and I are selling our house and moving to a retirement community, which also has assisted-living facilities. We have an offer coming this next week. This is the only offer we have had in the three months the house has been on the market. We have put a contract on an apartment in the retirement facility. 

 Presuming we can reach agreement with our buyer and sign the contract and get a settlement date, the retirement facility wants us to take out a bridge loan for the buy-in fee (about $300,000). Our concern is whether anything could go wrong before settlement. We feel we would be more comfortable waiting until we have the cash in hand. 

 Are we being overly fearful? We are told it is a normal procedure to take out the bridge loan as the earnest deposit guarantees that the settlement will go through. Is this true? We trust our seller's agent but feel the buyer's agent is dragging her feet. Should we have a real estate lawyer too? If so, how do we find one? 

Dear John — I suggest that you get a real estate attorney to assist you. If you don't know of any, you can call the local bar association in your area. Usually, those associations have referral arrangements.

You asked if anything can go wrong before settlement. The short answer is yes. While most settlements go smoothly, some can be a real disaster. For example: The buyer may have what we call "buyer's remorse" and want to walk away from the deal. That's why when I represent sellers I insist on a large earnest money deposit to put pressure on the buyer not to want to cancel the contract.

Additionally, the buyer may find problems in your house and either want you to pay a lot of money to correct those issues or walk from the contract.

Another possible glitch: In today's economy, the appraisal from the buyer's lender may come in too low, or the buyer may not be able to get the necessary financing.

Yes, a bridge loan is common, but there is a risk that you will end up having to pay two loans: your current mortgage as well as the bridge loan. I would give serious thought about going the bridge loan route.

 

— John
Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column, which appears every Sunday. Send questions to benny@inman.com.