Pandemic causes panic for homebuyers and renters
Q. I'm sure you are getting many questions about this, but my husband and I signed a contract to purchase our first house in early March. Since then, both of our salaries have been cut back due to the coronavirus. We spoke to our attorney who told us that if our reduction in income results in our being turned down for our loan, we can get out of the deal and get our deposit back.
That was good to hear but after talking to our loan officer, it appears we still have sufficient income to qualify for the loan. With our loss of income and no guarantee when or if our income will go back to where it was, we are very uncomfortable in moving forward with this purchase. Is there any other way we can get out of this deal?
A. Your attorney was presumably referring to the mortgage financing contingency. In the event you fail to qualify for the loan you applied for, and timely notice of the denial is given to the seller on or before a contingency date in the contract, the sale may be terminated and all deposits are returned to the buyer. Of course, this only applies if your application for the loan is denied.
Given the fact that both of you have experienced issues with your employment, which presumably could get worse before it gets better, I think it would be wise to extend the financing contingency through the date of the scheduled closing. This would protect you in the event you experience further salary cuts.
As to where you stand now, talk to your loan officer. He might have some suggestions. You could also contact the seller and investigate whether or not they would be willing to voluntarily terminate the transaction. Possibly, in exchange for the earnest money deposit, they would let you out. It can't hurt to ask.
Finally, pay attention to the news. Protections and safety nets for people are regularly surfacing. Maybe something arises that you could use.
Q. I have been renting a condominium from a guy for the past couple years. I recently lost my job due to the virus (I was in the restaurant industry) and have no money to pay May rent. I spoke to my landlord who said if I don't pay, I will have to leave. I also heard that landlords cannot evict right now.
I could move back with my parents but I would much prefer to stay where I'm at. If I can't be evicted, is there any reason I should leave?
A. Although it is true that at this point in time your landlord cannot take you to court and evict you, this does not mean the obligation is terminated. Whatever rent is not paid becomes a contractual obligation, whether you are evicted or not.
Sooner or later, life will return to normal and if you have spent the last five months living at your place without paying rent, you will almost certainly be sued for the unpaid rent and possession of the property. This will likely result in a judgment against you that, given your employment situation, will probably not be satisfied in the near future, if ever.
A judgment against you will result in a mark against your credit that could impact you for some time. And, once you are again earning an income, the landlord has the right to garnish your wages until the judgment is paid in full. That judgment, by the way, earns 9% annual interest in Illinois.
If the end result will likely be the same (you back with your parents), why not make the move before you subject yourself to a lawsuit and a judgment. You will be in far better shape when your income returns to move forward. If you choose this road, discuss it with your landlord. Tell him you would be willing to vacate the property by the end of the month provided he excuses you from the remaining obligation under the lease. Get this in writing.
• Send your questions to attorney Tom Resnick, 910 E. Oak St., Lake in the Hills, IL 60156, by email to tom@thomasresnicklaw.com or call (847) 359-8983.