Mortgage refused and deposit lost: the court case that should make homebuyers think twice
Mortgage refused and deposit lost: the court case that should make homebuyers think twice
In recent days, a case that occurred in the province of Modena has brought renewed attention to a very concrete issue in real estate transactions.
A buyer had signed an agreement to purchase an apartment and had paid a deposit of several thousand euros. As often happens, the purchase depended on obtaining a bank mortgage. When the bank decided not to grant the loan, the buyer asked the seller to return the deposit that had been paid.
From that moment the situation escalated. According to local news reports, some messages sent by the buyer were interpreted as threatening, prompting the seller to file a complaint.
The matter therefore did not remain a simple real estate dispute: the buyer was sent to trial on charges of attempted extortion, a criminal offence that can carry serious legal consequences.
It will ultimately be up to the court to determine the responsibilities in this specific case. However, the episode highlights how a real estate transaction that lacks the proper contractual safeguards can quickly become a serious problem.
And above all, it raises a question many buyers ask:
What really happens if the mortgage is not approved after signing a purchase proposal?
Many people believe that if the bank refuses the loan, the agreement automatically becomes void. In reality, this is not always the case.
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The deposit in real estate transactions
In most property transactions, when a purchase proposal or preliminary agreement is signed, the buyer pays a confirmatory deposit.
Its purpose is to strengthen the commitment between the parties.
Generally speaking:
• if the buyer withdraws from the purchase, the seller may keep the deposit;
• if the seller fails to honour the agreement, the buyer may claim double the amount of the deposit.
This mechanism ensures seriousness and stability in real estate agreements.
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If the mortgage is not granted: can the deposit be lost?
Many property purchases depend on a bank loan. If the mortgage is refused, the buyer may find themselves unable to complete the purchase.
At this point, everything depends on how the contract has been written.
When there is no mortgage clause
If the purchase proposal does not include a condition linked to obtaining a mortgage, the refusal of the loan does not automatically cancel the agreement.
In this situation, the buyer may:
• be unable to purchase the property
• lose the deposit already paid
This situation is more common than many people imagine.
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When a mortgage contingency clause is included
The situation is different when the contract includes a mortgage contingency clause.
In this case, the agreement only becomes effective if the bank grants the loan.
If the mortgage is refused:
• the contract has no effect
• the deposit must be returned to the buyer
This clause represents an important protection for those purchasing property with the help of bank financing.
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The point of view of LT Immobili & Design
In our daily work we meet many people who are about to make one of the most important investments of their lives: buying a home.
For this reason we believe that the phase before signing a purchase proposal is one of the most delicate parts of the entire transaction.
Before signing, it is always advisable to verify:
• the urban planning and cadastral documentation of the property
• the economic sustainability of the purchase
• the realistic possibility of obtaining the necessary mortgage
Whenever a purchase depends on financing, it is also good practice to carefully consider the inclusion of a mortgage contingency clause.
The goal is not to complicate the negotiation, but to build a clear and solid agreement for both parties.
