By Brian Funk
1. Cash Offers Mandate that a Buyer Not Obtain a Mortgage Loan
Wrong. Under the standard residential Delaware Agreement of Sale, if the financing contingency is not checked, the Buyer is not prohibited from obtaining a mortgage loan to purchase the property. It simply means that the Buyer is taking an enormous risk because if the Buyer cannot make it to settlement on time or cannot obtain the loan for any reason, the Buyer is in breach of contract and the Seller has every remedy against the Buyer. Contrary to popular belief, the Seller cannot simply refuse to close if the Seller learns that a loan is the works.
2. First-Time Homebuyer Transfer-Tax Discount Applies to All Property Types and Transactions
Wrong. I am not sure why I have been seeing this come up so much over the past 2 years, but the transfer-tax discounts available in Delaware to first-time homebuyers almost universally require that the Buyers plan on moving in within 90 days, held in the Buyer’s personal name, and an affidavit signed that the Buyer plans on making it the Buyer’s primary residence. I have seen young investors sad to learn that they cannot make their first investment or flip eligible for this discount. In this situation, I would recommend the property be held in an LLC so that it preserves the discount’s availability in the future. Additionally, certain municipalities do not offer such a discount.
3. I hate this house that I’m under contract to buy because I only looked at it online during the pandemic. If I walk away, the Seller can only keep my earnest-money deposit
Wrong. The standard residential Delaware Agreement of Sale does not limit the Seller to only seeking damages in the amount of the earnest-money deposit. In theory, in the event of a Buyer breach, the Seller could seek more than the earnest-money in damages through the court system.
4. I don’t need to come to settlement, and I’ll just sign on my iPad or use DocuSign
Wrong. Delaware does not yet have a full remote online notarization statute yet. As such, most residential lenders prohibit it. We are likely still a few years away until this becomes mainstream.
Brian Funk, Esq. is a real-estate attorney in Newark, Delaware and is the current chair of the DSBA’s Real & Personal Property Section. Brian can be reached at (302) 368-6233 or firstname.lastname@example.org