Promises made are apparently sacred only up to a point:
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.
I’m aware, by the way, that banks always put escape clauses in these commitments; escape clauses that buyers can’t put in their contracts with sellers. I’m also somewhat surprised that the seller is holding the deposit; here in Connecticut they are held by the agents, and can’t be released until both sides authorize it or a court orders the release. Perhaps that’s just not clear in the story. That gives even the most blatant defaulter some leverage to get some of the escrowed money. Perhaps the money is escrowed, and that’s just not clear in the story.
Still, the sacredness of these contractual arrangements seems stacked against the little guy doesn’t it. Someone made a representation to these people that wasn’t kept, and that someone will apparently suffer no consequences.
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