OMG Thing #2 just outdid Thing #3!!

Okay so I literally just hit publish on my last ranting post and got an email that just made thing #2 an even bigger problem than thing #3 so now I'm going to rant some more.. Why? Because it makes me feel better and I get to document my problems in case I need it all at the same time!!

So... about 2 months ago I bought a house on the north side of my city because it's closer to my work which I currently commute an hour each way to get to. Days after I closed on my new house, I put my house up "For Sale by Owner" just to see if we could sell it before having to resort to using a real estate agent's help (for a fee of course). My mom has a lot of experience buying and selling houses so this should have been no big deal.

To give a quick back-story, despite the issues many homeowners are facing with selling homes in this economy I wasn't as concerned about that because the last 4-5 homes that have gone up for sale in my neighborhood were sold to Bermese refugees, so I knew that there would be a demand for the home.

Well not even a day after we put up the sign we have an interested buyer. Sounds great right? Sure! To sweeten the deal the buyer doesn't even try to price negotiate on the house because they wanted to be in this neighborhood and wanted the house and decided that my asking price was reasonable so they sent over a purchase agreement for my asking price... Even better!

We go back and forth and finally I've signed the purchase agreement, and the buyer has signed the purchase agreement under the caveat that I can't close until July because the house I purchased was a renovation property and wouldn't be ready for me to move into until that time. The buyer had no problem with that. We went ahead and got the process moving in the meantime. (Meanwhile I have "removed my house from the market" due to entering into a purchasing agreement with the buyer.)

A couple of weeks go by and the buyer orders a home inspection. No problem, I expected as much. The inspection turns up a couple of small odds and ends, but nothing that presents a safety issue nor impacts the integrity of the house so again the buyer and I go back and forth and reach an agreement which we both sign off on.

So far so good... until today when I receive a couple of documents from the mortgage lender. One of the documents was an FHA Escape Clause that basically states that the buyer is released from any obligation to purchase the house without any penalty including earnest money if the requested selling price is more than the FHA appraisal on the property. HUH? I was confused by this because I thought I had already received pre-approval documents regarding the loan and therefore didn't understand why I should have to sign such a thing. After emailing back and forth with the buyer's agent and the mortgage lender, I learn that this is just part of an FHA loan. Well this seems ridiculous to me because basically as the seller I assume all of the risk. I've taken my home off the market for a month already and still have nearly another month to go before closing only to find out that my purchase agreement might become completely null and void if the appraisal doesn't match up to the asking and agreed upon amount.

I asked the mortgage lender to move the appraisal date up because I was going to be out of town on vacation in July until the day before the closing. She agreed to make a note in the account and I decided I would wait to sign the paperwork until after the appraisal to see if this would even be an issue because for all I know the property would appraise at the agreed upon price. I was only asking slightly more than what I paid for the home, I knew that the other homes in the area sold for a little more than what I was asking and that what I was asking was reasonable.

Worried, but waiting on the appraisal to determine how worried I should be, all I could really do was wait.

Well right after submitting my last rant, I checked my email and I got a message from the buyer's agent saying "hold that thought, the mortgage lender has determined that my house is in a partial flood area and the buyer would not be able to get down payment assistance. HUH? I have no idea what she is talking about. This home is not in a partial flood area. This neighborhood has storm drains that direct all storm water to the retention pond at the front of the neighborhood. To top it off, this house sits on an incline, so any excess water would run down the slope away from the home and to the storm drains. That is how most of the newer neighborhoods are designed specifically to avoid any flooding issues. How can the mortgage lender even make this claim?

I'm so pissed right now I don't even know what to do. I basically can't do anything until the purchase agreement has been broken or voided because I'm legally bound to it, but none of this makes any sense to me at all. What is the point in having a legally binding purchase agreement if the buyer is so protected by their loan that I have to sign an amendment that basically states that the buyer is in no way obligated to withhold their portion of the purchase agreement without penalty. That defeats the purpose of a purchase agreement, and it defeats the purpose of paying earnest money in the first place. The whole point in a purchase agreement is to protect both parties from each other. It states that I agree to sell at a given price under specific circumstances, and the buyer agrees to purchase at agreed price under the same circumstances. That way we are both protected. Why then require one party to sign an amendment that says the other party is in no way bound to this agreement? Someone please explain this to me. It makes no sense.