Question

If the buyer is assuming the seller's present loan and if the actual loan amount is found to be less than the stated amount in the contract which causes the amount of cash required from the buyer at closing to be increased by more than the amount inserted in the contract, what are the possible outcomes?

1) The buyer must come up with additional funds to make up the difference.
2) The buyer may terminate the contract (voidable) if the down payment increases more than the amount inserted in the assumption paragraph.
3) The seller has the option to carry back a small second equal to the difference of the quoted balance and the actual balance.
4) The contract automatically terminates.

Answer 1

If the actual loan balance is less than stated, the buyer might need to bring additional funds to closing, have the option to terminate the contract, the seller might carry a second mortgage, or the contract might automatically terminate, all depending on specific terms in the agreement.

Step-by-step explanation:

If the buyer is assuming the seller's present loan and the actual loan balance is less than the contracted amount, thereby requiring the buyer to bring additional funds to closing, several outcomes are possible:

1. The buyer may need to provide additional funds to cover the difference between the actual loan balance and the assumed loan amount stated in the contract.
2. Depending on the contract's terms, the buyer may have the right to terminate the contract if the required down payment exceeds the specified amount.
3. The seller might offer to carry back a second mortgage for the difference, creating a smaller, secondary loan for the buyer to repay in addition to the assumed loan.
4. In some cases, the contract might include a clause that leads to its automatic termination if the assumptions about the loan balance are inaccurate by a certain amount.

The specifics would depend on the terms negotiated between the buyer and seller, as well as any contractual provisions that address discrepancies in assumed loan balances at closing. Real estate contracts may include contingencies that allow either party to address or renegotiate the terms in the event of such a discrepancy.