A buyer is purchasing a cooperative apartment in a building that has a flip tax of 2% of the gross sale price payable by the seller. The building also has a right of first refusal. If the buyer's share loan application is approved but the cooperative board exercises its right of first refusal, what happens to the buyer's loan commitment?
Correct Answer
B) The loan commitment becomes void since the original transaction cannot proceed
When a cooperative board exercises its right of first refusal, the original sale transaction is terminated because the board (or its designee) is purchasing the shares instead of the original buyer. Since the loan commitment was specific to that buyer purchasing those specific cooperative shares, the commitment becomes void and cannot be used for the terminated transaction.
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Related Concepts
In the context of foreclosure, a deed transfers ownership of the foreclosed property to the new owner, typically the buyer at a foreclosure sale.
Discount points are upfront fees paid to a lender at closing to reduce (buy down) the interest rate on a mortgage loan. One point equals 1% of the loan amount and typically reduces the rate by approximately 0.25%.
An FHA loan is a mortgage insured by the Federal Housing Administration that allows lower down payments and credit scores than conventional loans. It is designed to help first-time homebuyers and borrowers with limited resources.
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