Q: When a Buyer cannot provide proof of lender's PreApproval letter is the Seller still bound to the contract?
Should the Buyer be allowed to receive all of the Earnest money in such case according to law, seeing they cannot prove they are able to pay for Seller's property as stated in the contract?
A:
It depends upon the language of your earnest money contract.
Ordinarily “proof of a pre approval letter” is not required.
But, commonly, earnest money contracts contain a third party financing addendum. This addendum may allow the Buyer to cancel the contract and receive its escrow deposit back if approval of third party financing is not obtained or it may limit that right to circumstances in which the appraisal of the value of the property does not meet the lender’s underwriting requirements.
Your real estate agent ought to be able to explain to you the terms of your earnest money contract.
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