There are still plenty of people losing their jobs. So, if you lose your job and you are under contract to purchase a home, what happens?

First of all, don't panic. There are several options that may allow you to exit the contract without penalty, if that's what you want or need to do.

But first, consider having your agent talk to the seller's agent and discuss the possibility of delaying closing to give you some time to search for a new job. This doesn't always work, but if the sellers have the ability to be flexible and you believe your prospects of securing new employment are good, it's worth a try.

Now let's look at your options for getting out of the contract if that's what you need to do.

Hopefully, the contract was written with a financing contingency. This allows you an out if the lender will not give you a mortgage to buy the house. The financing contingency, like all contingencies, has a specified number of days in which you can exercise this option to get out of the contract. Hopefully, this contingency has not been removed when you lose your job. If this is still open, a letter from your lender declining your application, along with an explanation of your job situation should be enough to release you from the contract. Because there is no default, hopefully the sellers will sign the release and agree to release your earnest money deposit. But remember that this is never automatic.

As a buyer there are typically several additional "outs" in a contract. One of them is the home and/or radon inspections. If those have not yet been done you can use those as a reason for withdrawing from the contract.

And, if this is in a Homeowners's Association, you may be able to use the three days you have to review the HOA documents as another out.

If it's late in the game and you're close to settlement, it is possible that none of these options may be available. At that point, your agent should immediately talk to the seller's agent and lay out the situation. I'd like to think that people of good will could work something reasonable out. Hopefully, you can even still get your earnest money deposit back.

But better to lose that money than to buy a house you already know you can't afford!

Buyer clients of mine were advised this week by their lender that they did not need to do a pre-offer home inspection on a foreclosure listing because, since they are getting a VA loan, the inspection is automatically part of what they get. Voila! Save money!

Bad lender!! Unfortunately, he doesn't quite have the whole picture.

When you get either a VA or FHA mortgage, as part of the appraisal, there is something of an inspection done. What these entities are doing is making sure there are no significant issues with the home that will cause the buyer to have to come up with money for repairs in the first year or two of home ownership. It's a worthy goal. But the inspection has gotten increasingly cursory over the years. And, things that the VA or FHA consider to be a problem, may in fact be things that are not a problem at all. (I've seen deals fall apart over these things!)

A real home inspection takes around 3 hours, sometimes longer, depending on the home. Each system will be tested. The home will be evaluated for water issues. The inspector will go into the attic to look for leaks. Better yet, the potential buyer gets a better understanding of what they're buying, how the systems work and what they'll need to do to maintain their home in good condition.

The VA or FHA appraisal doesn't come close to performing any of these functions.

But there's an even bigger problem here. The lender assured my clients that if they find anything significant, they'll simply increase the size of the loan so they can immediately have it fixed. So, no worries about having to walk away from the contract and lose their earnest money deposit to the bank.

So, even if the appraisal says the home is worth only the contract price and the place needs a brand new roof, no problem loaning them the extra money? A lending institution, given our current situation is willing to loan over 100% of the value of the property to first time home buyers? (Yes, this is going to be a no money down transaction.) And, they'll say this up front without even limiting the amount? If the required repairs bring that number to 110% of the value of the home, are they still going to approve the loan?

I think the answer is "no" and I think they've badly mislead my clients. Lending institutions should do what they do best, make lending decision. (OK, that may not be what most of them do best any more but we're giving them the benefit of the doubt!)

Lending institutions should not be offering advice that puts my clients at risk for losing their earnest money.

At the end of this post you'll find a link to an article about two home builders who are in trouble, Levitt and Beazer.

Levitt is a South Florida based home builder and should have no impact to consumers in this area. Beazer, on the other hand, builds throughout the area.

Beazer's credit rating has taken huge hits recently. It's cancellation rate is at 68%. (Meaning that 68% of the people who sign a contract to buy one of their homes eventually back out.) And they're restating earnings back to 2004 because of some irregularities. All this has the smell of a company in trouble. Read the article and decide for yourself.

I wouldn't be giving a large deposit to Beazer right now. What happens if they're not around to build that house? And how about the 1 year builder guarantee after you're in the house? And, should things get worse and Beazer declares bankruptcy, you've got no chance of ever seeing that deposit again. Like I said, I wouldn't do it with my money!

http://seekingalpha.com/article/49971-kiss-levitt-goodbye-and-pucker-up-for-beazer?source=d_email