Read the full decision: Hopkins v. Coco, 174 So. 3d 201 (La. Ct. App. 2015).
A Louisiana appellate court has considered whether a real estate professional had a duty to notify the lender that the sellers had reduced the sales price, even after the lender had already completed its analysis of the buyer’s eligibility for a loan.
David and Gwendolyn Hopkins (“Sellers”) listed a property for sale and entered into a purchase agreement with Juanita Coco (“Buyer”). The purchase agreement required the Buyer to apply for a mortgage within seven days.
The Buyer applied to Countrywide Bank (“Lender”) for financing, and the Lender ordered an appraisal for the property. The appraisal came back lower than the purchase price. The Buyer sent the Sellers an amendment (“Amendment”) to lower the purchase price to the appraised value. The Sellers signed the Amendment and faxed it to the Buyer’s representative, but the Buyer’s representative did not receive the amendment until the deadline date for the Buyer’s completion of the financing contingency. On that same day, the Buyer received notice from the Lender that her application had been rejected. The Buyer’s representative never forwarded the Amendment to the Lender, but the Lender testified it wouldn’t have mattered because the application could not have been reviewed again in one day. The parties did not extend the agreement to allow the Buyer to reapply for financing.
When the Buyer was unable to secure financing to complete the purchase and thus terminating the contract between the parties, the Sellers brought a lawsuit against the Buyer, the Buyer’s representative, and the representative’s brokerage, arguing that the Buyer had not acted in good faith in her efforts to secure financing and the Buyer’s representative had not forwarded the Amendment to the Lender. The trial court entered judgment in favor of the defendants, and the Sellers appealed.
The Court of Appeal of Louisiana, Fourth Circuit, affirmed the lower court. The Sellers’ alleged that the Buyer’s representative’s failure to send the Lender the Amendment resulted in the Buyer’s failure to secure financing. Under Louisiana law, the Buyer’s representative had a duty to communicate accurate information to the parties. The Buyer’s representative argued that she had not breached this duty, as there was no evidence that the failure to forward the Amendment to the Lender had caused the rejection of the Buyer’s application. The court agreed with this argument, finding that the failure of the parties to extend the financing contingency caused the transaction to collapse, not the failure to send the Amendment to the Lender. Therefore, the court affirmed the ruling in favor of the Buyer’s Representative.
Hopkins v. Coco, 174 So. 3d 201 (La. Ct. App. 2015).