Based on the below se of circumstances are these defendants in breach of contract?

The Plaintiff (Seller) entered into a real estate contract with the Defendants (Buyer) on July 10, 2011, for the purchase of property known as XYZ Property,Any Town NJ

The purchase price of this property was $855,000, with Defendants depositing the amount of $11,000 into Realtors escrow account at time of contract signing.
The Defendants agreed to apply for a mortgage of $600,000 from ABC Bank and make a payment of $244,000 at time of closing.

The Defendants were pre-approved by ABC Bank for a mortgage amount of $600,000..

Defendants applied for a mortgage amount from ABC Bank in the amount of $684,000 ,knowing full well that the contract that they had entered into with the Plaintiff stipulated that they were required to apply to ABC Bank for an amount of $600,000.

The Defendants were rejected by ABC Bank for the mortgage amount of $684,000 because the loan to value ratio was above 80 %. Had the Defendants applied for the contracted amount of $600,000 the loan to value would have been below 80% and ABC Bank would have approved the mortgage.


Examples of loan to value calculations are as follows:
1) Contracted mortgage amount $600,000 divided by appraisal value of $757,000
$600,000/$757,000=79.26%
2) Submitted mortgage amount $684,000 divided by appraisal value of $757,000
$684,000/$757,000= 90.3%
The loan to value of 80% or lower is the value ABC Bank required to permit a mortgage on this property.
Because the Defendants submitted a higher mortgage request ABC denied him a mortgage.

The contract signed by the Defendants also has a clause which reads as follows:
“The appraised value ascertained by Buyer's lender shall only be significant to this transaction if the results of said appraisal causes Buyer's lender to deny Buyer's mortgage for the amount stated in the contract.
The mere findings of the lender's appraisal shall not entitle buyer to cancel the contract if buyer's lender will approve the mortgage as noted in the contract.”

The purpose of a written real estate contract is to protect the rights of both the buyer and seller. If individual buyer's who signed a real estate contract were allowed to apply for a mortgage higher than stated in the signed contract, and then cancel the contract because they did not get the mortgage, it would most certainly invalidate and make many written real estate contracts worthless.

Thanks for spending the time copying your homework (or, from the looks of things, copying and pasting your homework) but we don't do homeworks in the legal forum.

Why did you post both the question and the answer ("The purpose of a written real estate contract is to protect the rights of both the buyer and seller. If individual buyer's who signed a real estate contract were allowed to apply for a mortgage higher than stated in the signed contract, and then cancel the contract because they did not get the mortgage, it would most certainly invalidate and make many written real estate contracts worthless."

If you are asking whether your answer is correct, yes it is. Assuming that it can be proven that the buyer was approved for $600K.

"Why did you post both the question and the answer ("The purpose of a written real estate contract is to protect the rights of both the buyer and seller. If individual buyer’s who signed a real estate contract were allowed to apply for a mortgage higher than stated in the signed contract, and then cancel the contract because they did not get the mortgage, it would most certainly invalidate and make many written real estate contracts worthless."
This is not my home work.This is an actual real estate breach of contract.
This my opinion of the breach.I want to see if others agree with me.
I intend to proceed pro se, because of the high cost of hiring a lawyer.
I will have an attorney review and advise me.In New Jersey cases are usually handled by mediation.

So who are you in this transaction? I assume the seller. What is the EXACT wording referring to the amount of mortgage? Do you have proof of approval for $600K

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Originally Posted by odrasalj

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This is not my home work.This is an actual real estate breach of contract.
This my opinion of the breach.I want to see if others agree with me.
I intend to proceed pro se, because of the high cost of hiring a lawyer.
I will have an attorney review and advise me.In New Jersey cases are usually handled by mediation.

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Not hiring an attorney, in the immortal words of Poor Richard (or Shakespear's Polonius, or some such person), is frequently being "penny wise and pound foolish".

So, sure, it appears that it might be a breach of contract, if you can prove that the $600,000 loan would have been approved. What are you going to ask for damages?

Yes, you can file a lawsuit against the buyers. But you will not be able to make a claim for damages yet. You have to re-list the property for sale, enter into a new contract and proceed to closing. Then, if the selling price in the second transaction is less than the selling price in the first transaction, you can sue the buyers in the first transaction for the difference in price.

I sincerely hope that you have already given written instructions to the realtor that they are not permitted to return the deposit monies to the buyer.

Are you in northern or central NJ? If so then most real estate transactions have attorneys involved from the start. Did you have an attorney representing you at all?

Also, most cases in NJ are NOT handled by mediation. Mediation is entirely voluntary.

In n.j. buying or selling a house must through lawyer.first should hear what they(both side lawyer) say.The buyer is breach the contract if as you mention.but there are big question.When apply for mortgage you must submit the copy of those contract and bank must review it before accept the application.How can the bank miss this part.Any legal move all through both side lawyer review then take action.Your lawyer represent your benefits will know what to do.At lest holding their 11,000.But the buyer if don't want to buy, there are many way to do it.Your house need to be inspect according to the contract and never 100% perfect and the buyer can pick those defects and turn down the sell.Buy the way where you find the bank welling to give 600,000.mortgage if the buyer not cooperate.

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Originally Posted by wauya

In n.j. buying or selling a house must through lawyer.

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Can you cite the regulation that says an attorney is required?

"Yes, you can file a lawsuit against the buyers. But you will not be able to make a claim for damages yet. You have to re-list the property for sale, enter into a new contract and proceed to closing. Then, if the selling price in the second transaction is less than the selling price in the first transaction, you can sue the buyers in the first transaction for the difference in price.

I sincerely hope that you have already given written instructions to the realtor that they are not permitted to return the deposit monies to the buyer.

Are you in northern or central NJ? If so then most real estate transactions have attorneys involved from the start. Did you have an attorney representing you at all?



Also, most cases in NJ are NOT handled by mediation. Mediation is entirely voluntary"

I sold my house a year later for $55,000 less than the contract amount.

The realtor has been informed in writing not to release the escrow.

I will be commencing a lawsuit for $125,000.Which will include the difference in contracted price and sale price of house to new buyer.Well test performed twice because certification expired,Township required Certificate of Occupancy which expired and the mortgage and taxes paid for 1 year from the date of breach to the new closing of my house minus the rent that I would have paid had the breach not taken place.

I am from central NJ.I was represented by an attorney all through the transaction.

The attorney does not handle this type of lawsuit

"So, sure, it appears that it might be a breach of contract, if you can prove that the $600,000 loan would have been approved. What are you going to ask for damages?

I can prove that the $600,000 loan would have been approved because the bank that the buyer was using has a policy of approving a loan to value of 80% or less.The appraisal on the property and the loan amount supports a loan to value of less than 80%.
I am going to ask for the difference in the contracted amount minus the actual sold price plus other losses that I have suffered. (See my previous response for more details)

There are no cite regulation that say an attorney is required in writing but contract signed just through real estate agent without lawyer review is not going to be effect.All standard real estate contract must including this part .This may just in nj as I know.Sure you can buy or selling in the way if both side agree but will have no protection.Especial many part such big money involve.

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Originally Posted by wauya

there are no cite regulation that say an attorney is required in writing but contract signed just through real estate agent without lawyer review is not going to be effect.All standard real estate contract must including this part .This may just in nj as I know.Sure you can buy or selling in the way if both side agree but will have no protection.Especial many part such big money involve.

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This is not correct. All broker-prepared contracts in NJ must contain a clause allowing both parties a 3-day right of attorney review, during which time either party can cancel the deal. However there is no law requiring that either party retain an attorney.

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Originally Posted by odrasalj

"So, sure, it appears that it might be a breach of contract, if you can prove that the $600,000 loan would have been approved. What are you going to ask for damages?

I can prove that the $600,000 loan would have been approved because the bank that the buyer was using has a policy of approving a loan to value of 80% or less.The appraisal on the property and the loan amount supports a loan to value of less than 80%.
I am going to ask for the difference in the contracted amount minus the actual sold price plus other losses that I have suffered. (See my previous response for more details)

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First, please use the quote feature correctly. There is a quote button that will place quote tags around the quoted text. You can edit the text within the quote tags if you want, but leave the tags.

If that is your proof, you may have an issue. Loan underwriting is not an exact science. A bank may have a guideline, even a policy to approve loans of less than 80% of value, but that is no guarantee they would have approved this buyer. You will NEED someone to testify that a loan of $600K would have been approved.

I also asked for the exact wording on the clause detailing the amount of the mortgage.

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Originally Posted by wauya

there are no cite regulation that say an attorney is required in writing but contract signed just through real estate agent without lawyer review is not going to be effect.All standard real estate contract must including this part .This may just in nj as I know.Sure you can buy or selling in the way if both side agree but will have no protection.Especial many part such big money involve.

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Then you should NOT be saying that it is required. Allowing for a 3 day attorney review does not make a requirement. Whether it is smart to not using an attorney is a different issue.

"So who are you in this transaction? I assume the seller. What is the EXACT wording referring to the amount of mortgage? Do you have proof of approval for $600K"

I am the seller in this transaction.


This is a mortgage contingency clause to long to put here.In essence it reads buyer is to make immediate written application for a 30Yr conventional mortgage by 8/15/10
Mortgage Amount To Be Applied For: $600,000

I have a copy of the Bank pre-approval letter that was attached to Contract For Sale.

In my opinion it's not necessary to prove that a $600K loan would have been approved. All the seller has to show is that the buyers applied for a mortgage significantly greater than the amount required in the contract.

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Originally Posted by LisaB4657

In my opinion it's not necessary to prove that a $600K loan would have been approved. All the seller has to show is that the buyers applied for a mortgage significantly greater than the amount required in the contract.

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Well since the OP has a pre-approval letter, the point is moot because that would constitute sufficient proof especially given the above opinion.

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Originally Posted by LisaB4657

In my opinion it's not necessary to prove that a $600K loan would have been approved. All the seller has to show is that the buyers applied for a mortgage significantly greater than the amount required in the contract.

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Thank You! That is also my feeling about this.I believe that the buyer got cold feet and wanted to get out of the contract.But I think he picked the wrong way to do it.

As far as mediation is concerned in Central Jersey small claims court all cases are first sent to a mediator.It was my understanding that all the other cases were also handled this way.
I could be wrong about that but I will call the court to confirm .

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Originally Posted by odrasalj

As far as mediation is concerned in Central Jersey small claims court all cases are first sent to a mediator.It was my understanding that all the other cases were also handled this way.
I could be wrong about that but I will call the court to confirm .

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Again, please use the quote feature correctly. I edited your post to show you how it should look.

Small claims courts are different from other civil courts.