Federal Worker Loses Financing for New Home After Firing and Fears Lawsuit From Buyer of Their Home—Now What?

 
 

What do you do if you lose your job just as you're about to secure a loan for a new home?

A Reddit user posed this question, claiming that their partner was allegedly laid off during the recent federal mass firings.

"We are getting a letter from the lender confirming that we are denied financing now," the user claimed in the post. "Additionally, our contract was contingent upon us finding a suitable new home, which we did, but it's gone now."

Then the user posed the big question: "Are we gonna get sued?"

Federal workers fired in droves

Thousands of federal workers have been laid off in the past few weeks in the United States.

"It has been some time since we have seen unexpected mass firings like this," says real estate professional and attorney Bruce Ailion, of Re/Max Town & Country in Atlanta. "People who worked in the government public sector often accepted lower wages because of the expectation of job security. I'm sure the last thing these sellers planned for when crafting their transaction was losing a government job."

As a result, there's been a lot of social media chatter about what will happen to the Washington, DC, real estate market.

"I spoke with a DC investor about this, and he's slowing down on buying due to uncertainty," says Cedric Stewart, a real estate expert at Keller Williams in Washington, DC. "But this time, we're still seeing multiple offers on hot homes, and the only section with increased listing activity so far is Loudoun County, VA—25 miles west of DC."

Stewart says the Washington, DC, area has so many lawyers, medical pros, consultants, tech workers, and military "that it's unlikely the local market will tank—but we could see an increase in listings."

Additionally, although inventory is rising and prices are cooling in the DC area, those trends predate the 2024 presidential election, and are largely in line with national trends.

"DC is not a booming market, but it's not crashing either," says Realtor.com senior economist Joel Berner. "It's really pretty average within a national market that's also cooling."

In the meantime, what should the homeowners do? We consulted with real estate professionals for their insights and advice on the matter.

Why did they lose financing for a new home?

Even though the Reddit poster's partner supposedly had a job when they were pre-approved for a mortgage, everything changed when they got laid off.

"Income is the single most important factor in getting a mortgage with a lender," says mortgage broker Brady Bell, of Bellhaven Real Estate in Idaho Falls, ID. "There are plenty of programs for people with bad credit, but there aren't many programs for unemployed individuals without an income."

For example, if you have good credit, no debt, and a 5% down payment, you'd need to make at least $86,000 per year to qualify for a $500,000 home, according to Bell.

"However, lenders might be inclined to lend more than a person can actually afford, since lenders only get paid when a loan closes," says Bell. "While you can get approved for a $500,000 house with an $86,000 income, it would be extremely tight. You'd be super stretched, but you could technically still 'afford' it. However, you'd really need to make at least $127,000 a year to be able to comfortably afford a house in that price range."

Is a contract contingency normal?

The Reddit poster had what's called a home replacement contingency.

This means the seller is required to sell their home only if they can find and secure a new property to buy first.

It's similar to the sale of prior home contingency, which refers to a buyer needing to sell their existing home before they can purchase a new one.

The home replacement contingency is more seller-focused, and the sale of prior home contingency is typically buyer-focused.

"It's extremely common for a deal to be called off due to a layoff," says Bell. "Within about 24 hours of closing a real estate transaction, a final [verification of employment] is typically completed. If that VOE indicates the borrower on the mortgage lost their source of income, it could prevent that borrower from qualifying."

Bell says there are instances where there is a second wage earner such as a spouse or partner on the loan who still qualifies without that lost income, and in that case, the loan could proceed.

"However, if they no longer qualify, the lender has no choice but to deny lending to the borrower for insufficient income," Bell says, "and then the seller has to call off the sale of their house due to losing their new home."

That happens more often than you think, even at the final hour.

"One of my team members in Florida had buyers that literally found out that their loan was denied at the closing table with a brand-new construction home they were going to buy," says Cara Ameer, a real estate agent with Coldwell Banker who operates in California and Florida. "The wife had lost her job and had not told her husband."

Common contingencies in real estate

Contract contingencies are a standard part of real estate transactions. These are some of the most common contingencies:

Mortgage/financing contingency

A mortgage/financing contingency is a clause in a contract that allows the buyer to back out of the deal if they are unable to secure financing for the home purchase. It protects the buyer by ensuring that if they can't get a loan or mortgage within a specified time frame, they can cancel the agreement without losing their earnest money deposit.

This contingency is usually included to give buyers time to apply for and secure a mortgage or financing. If the buyer doesn’t get approved, they can terminate the contract without penalty.

Home inspection contingency

A home inspection contingency is a clause in the contract that allows the buyer to have the property professionally inspected within a certain period after the offer is accepted. If the inspection reveals significant issues with the home, the buyer can negotiate repairs, ask for a price reduction, or even walk away from the deal entirely without losing their earnest money.

This contingency protects the buyer by giving them the option to back out or renegotiate if the home has problems that weren’t initially visible or disclosed.

Homeowners insurance contingency

A homeowners insurance contingency is a clause in the contract that makes the purchase of a home contingent on the buyer being able to secure homeowners insurance for the property.

Lenders typically require buyers to have insurance in place before finalizing the loan. This contingency allows the buyer to back out of the deal if they are unable to obtain insurance in a certain number of days, which could happen if the home is in a high-risk area such as a flood or fire zone or has significant issues that make it uninsurable. It protects the buyer from moving forward with the purchase without proper insurance coverage.

"Once you do go under contract, you should start shopping for insurance right away during your due diligence period to ensure you can secure a policy at a price and terms that you are comfortable with," says Ameer. "In California, there is now a specific contingency for insurance as part of the contract."

At least 13% of real estate agents in California had a sales transaction canceled due to their clients not being able to find insurance in 2024, according to the California Association of Realtors.

And that number is likely to go up in 2025, especially after the catastrophic California wildfires.

Title contingency

A title contingency is a clause in the contract that ensures the seller provides a clear and marketable title to the property. It gives the buyer the right to back out of the deal if any title issues or defects are found during the title search, such as liens, disputes, or ownership claims that could affect the property's transfer.

It protects the buyer by ensuring they are purchasing a property that can be legally and freely transferred without any legal complications or unresolved claims.

Will the seller get sued?

The Reddit user whose partner was laid off is worried about getting sued because the financing on their new house fell through, and they can no longer sell their house now.

"There is risk of litigation here, but the outcome of this situation will depend entirely on the precise language used in the contract," says attorney Chad D. Cummings, of Cummings & Cummings Law in Florida and Texas.

If the contract was properly drafted by the seller’s attorney or agent, then the seller’s obligation to close on the existing home would not yet have arisen because they never fully secured a replacement property.

"In that case, this would likely be a nonissue, litigation risk would be minimal, and the poster would likely have no further action to undertake other than to return the earnest money out of escrow," says Cummings.

Conversely, if the contract language is vague or ambiguous—for instance, if it simply states that the sale is contingent upon finding a suitable replacement home but does not define what “find” means—there is a heightened risk of dispute.

In any case, the Reddit poster should check their contract for a force majeure clause, according to attorney Claudia Cobreiro, of Cobreiro Law in Miami.

"In contracts here in Florida, the standard force majeure clause includes acts of God, which are outside of a party's control, such as hurricanes or natural disasters," says Cobreiro. "But starting in 2020, force majeure also included 'governmental actions and mandates' due to COVID. The argument here would be because of this governmental act, this person lost their federal job, which would be covered by the force majeure clause"—letting them off the hook.

Cobreiro says this would be something unprecedented, "but that's why we sometimes end up in litigation, because it's something we haven't seen before."

The Reddit poster should reach out to their real estate agent or attorney to explore their options, aiming to resolve the issue amicably and to avoid legal action if at all possible.

After all, a layoff is hard enough to deal with without a lawsuit in the mix.

Read more at Realtor.com

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Just Listed: This tri-level home in Lake Arbor should be making your "must see" list!

 

This tri-level home in Lake Arbor should be making your "must see" list!

As you enter the double front doors you will want to kick off your shoes because you are HOME. On the MAIN LEVEL you will find the kitchen, dining room and a "formal" living space. The kitchen has been remodeled with NEW Quartz countertops, sink + faucet and new appliances! From the "eat in kitchen" area, you overlook the living room with its main attribute of a remodeled gas fireplace! On this LOWER LEVEL you will also find a 3/4 bathroom and a bedroom that is perfect for an office or a guest room! The laundry room and garage access is also on this level. Your next stop may be down to the finished basement! Freshly cleaned and stretched carpet makes this room perfect for: workout area, rec room, play room, movie room or what your household needs extra space for! You will finally make your way up to the UPPER LEVEL to find 3 bedrooms and 2 bathrooms. The primary room has an ensuite with 2 closets and a remodeled bathroom. The other two bedrooms are very similar - so no one will fight over them! The FULL hall bathroom in the upper hallway has been remodeled with new floors, new vanity, light fixture and mirror! Throughout the entire home, you will find fresh paint and new interior doors and hardware! The water heater was replaced in 2024 as well! If you want to use the 2 car garage for cars - the two sheds in the backyard are perfect for storage of yard items and all things Colorado (bikes, golf clubs, fishing gear, camping gear). There is a concrete patio perfect for your outdoor sitting area. The only question you should have while touring this home is... when do we get the keys? You are going to LOVE living here!

Listed by Emily Johnson for West + Main Homes. Please contact Emily for current pricing + availability.

 
 
 

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West + Main Homes
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(303) 704-3045
emilysellsdenver.com


 

Just Listed: Located near downtown Littleton, this luxurious 3-bedroom, 4-bathroom townhome offers breathtaking mountain views from your private rooftop patio!

 

Located near downtown Littleton, this luxurious 3-bedroom, 4-bathroom townhome offers breathtaking mountain views from your private rooftop patio!

Platte 56 isn’t just a home—it’s a lifestyle! Located near downtown Littleton, this luxurious 3-bedroom, 4-bathroom townhome offers breathtaking mountain views from your private rooftop patio. Built in 2018, the home feels brand new, featuring high-end stainless steel appliances, sleek luxury flooring, and stylish modern cabinetry that elevate everyday living. Ideally situated along the Platte River and the Platte River Bike Trail. The first level welcomes you with a versatile bonus room, perfect for a home office or gym, as well as a convenient powder bath and access to the 2-car garage. On the main level, the spacious kitchen and living area are perfect for entertaining, with a balcony overlooking the Platte River. The next level is dedicated to the 3 bedrooms, including the primary suite with large windows offering stunning views of the river and a large en suite bathroom. The upstairs also features a convenient laundry area. Whether you’re biking to downtown Denver or enjoying a weekend outing to Breckenridge Brewery, adventure is always within reach. With low HOA fees, you can enjoy the perks of townhome living without the extra cost. Don’t miss your chance to call Platte 56 home—schedule a showing today and experience a lifestyle filled with comfort, convenience, and adventure!

Listed by Ashley Busch for West + Main Homes. Please contact Ashley Busch for current pricing + availability.

 
 
 

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HOA Fees Can Be Tax-Deductible: Expert Explains What You Can Claim Back

 
 

It's officially tax season. Attempt to control your glee.

But seriously: Monday, Jan. 27, 2025, was the first day that the Internal Revenue Service started accepting and processing 2024 income tax returns.

The deadline to file is Tuesday, April 15, 2025, which we all know is when you're actually going to file (join the club!)

Homeowners have a lot of tax implications to consider—and for those who own places with homeowners association fees, it can get even more complicated. It's time to get real about how your real estate choices will affect your tax return.

Are HOA fees tax deductible?

HOA fees are used to maintain and improve the community and can include payments for maintenance of common areas, landscaping, insurance, amenities, reserve funds, and repairs.

So are these HOA fees deductible on taxes? It depends.

If you buy a property as your primary residence and are responsible for paying HOA fees on a monthly, quarterly, or yearly basis, those fees are not tax deductible.

"However, if you use part or all of the home for business purposes such as a rental or a home office, you may be able to deduct some or all of the HOA fees," says tax attorney John Georvasilis, of Seattle Legal Services in Seattle.

These exceptions are explained further below.

Can I write off HOA fees when working from home?

If you decide to take a home office deduction and are self-employed, a portion of your HOA can be considered tax deductible on a prorated basis.

"The most common way to prorate the HOA dues would be to add up your total HOA dues for the year and multiply that amount by the square footage of your home office over the total square footage of your home," says Logan Allec, CPA and owner of Choice Tax Relief in Los Angeles.

If your home office occupies 20% of your home, you might be eligible to deduct 20% of your HOA fees.

Just make sure you meet IRS requirements, such as using the home office exclusively for work.

Can I write off HOA fees on a rental property?

If you own a rental property and lease it to a tenant, you can deduct your HOA fees.

"The HOA fees are an ordinary and necessary expense to generate your rental income," says Allec.

If you rent out a portion of the home, just a portion of the fees are deductible.

"For instance, if you rent out a single bedroom, you can write off a portion of the HOA fees based on the square footage of that room compared to the rest of your home," says Georvasilis.

Can I write off HOA fees for a home I rent out part-time?

According to the IRS, a house is considered a second home and not a rental property if you use it for personal purposes during the tax year for a number of days "that’s more than the greater of 14 days, or 10% of the total days you rent it to others at a fair rental price."

So if you rent out the property for 200 days in a year, 10% of that is 20 days. If you use the property for more than 20 days for personal purposes, the IRS considers it a second home and not a rental.

In that case, "you don't report any of the rental income and do not deduct any of the rental expenses, including HOA dues—because they're not tax deductible," says Allec.

But if you didn't use the home for personal purposes for a number of days that was more than the greater of 14 days, or 10% of the total days you rent it to others at a fair rental price—a portion of the HOA dues will be tax deductible.

For instance, if you rented out the property 75% of the year, you can deduct 75% of your HOA fees on your tax return as a rental expense.

Are special assessments tax deductible?

A special assessment is an additional fee that an HOA may impose to cover unforeseen expenses. Unlike regular HOA dues, special assessments are typically only applied in emergency situations.

If the special assessment is used for repairs or maintenance, it is normally tax deductible.

But if it is used for improvements, it is not tax deductible.

Do HOA fees and special assessments impact capital gains taxes when I sell my house?

Monthly HOA fees do not impact capital gains taxes, but special assessments might, according to Allec.

When you sell your property, you could be subject to capital gains tax on any profit from the sale.

Keeping a record of special assessments that were used for improvements to your property "could increase your cost basis in your home, which could decrease your capital gains tax when you sell it," says Allec.

How do I deduct HOA fees or special assessments?

To write off your HOA fees or special assessments on your taxes, it's important to ensure that you comply with IRS regulations.

To deduct HOA fees on a home office, "use Form 8829 to calculate your home office deduction, including the portion of your deduction for HOA fees, and report your total home office deduction at the bottom of Schedule C," advises Allec.

More details about the home office deduction can be found in IRS Publication 587.

To take a tax deduction on a rental property, use Part 1 of Schedule E to list your rental income and expenses.

If you rent your second home part-time, review IRS Publication 527 and then consult a tax advisor.

It’s important for homeowners to speak with a tax professional to gain a clear understanding of HOA fee deductions and their potential impact.

Read more at Realtor.com

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Seller Concessions: A Smart Strategy To Get Your House Sold

 
 

For the past few years, it’s been mostly a seller’s market. But dynamics are shifting as the number of homes for sale grows. And that means that the market is balancing out a bit. As a result, some sellers are finding they need to be more flexible to close a deal. One strategy that can help? Offering concessions.

As the National Association of Realtors (NAR) explains:

“As home inventory begins to grow and buyers regain some advantage in the market, sellers may consider offering more in negotiations to make the deal more attractive and get to the closing table.”

What Are Seller Concessions?

Concessions are homebuying costs that a seller agrees to cover as a way to get their house sold. And based on data from the National Association of Realtors (NAR), nearly 1 out of every 4 sellers (24%) offered a concession in 2024. Here are a few of the most common types of concessions:

Covering Closing Costs: The seller pays for part (or all) of the buyer’s closing costs, like appraisal fees, title insurance, or loan fees.

Price Adjustments: Instead of making repairs, a seller might lower the purchase price to make up for updates the buyer will need to tackle.

Adding a Home Warranty: A seller may throw in a home warranty, giving the buyer peace of mind key repairs will be covered in the first year.

And don’t worry. This doesn’t mean you have to come up with more cash to make it happen. These are things that get subtracted from your profits at closing – not more funds you have to bring to the table. And not all concessions are about money.

There are other extras you could throw in. Like, if your buyer is coming from an apartment and has never had a yard before, they may ask if you’d be willing to leave your lawn mower behind. That’s another lever you could pull to keep them happy.

How Concessions Help Sellers

Offering concessions can be a smart strategy for sellers to get a deal done. As Dennis Shirshikov, Professor of Finance and Economics, City University of New York/Queens College told The Mortgage Reports:

“Pricing homes realistically and being willing to offer concessions, such as covering a portion of closing costs or including upgrades, will be key to closing deals . . . in a less frenzied market.”

For example, let’s say you accepted an offer from a buyer, but after their inspection, you found out there are some repairs they want you to tackle before you hand over the keys.

Rather than starting at square one and searching for a new buyer, you could offer a concession. One option is you can take on the repairs and cover the costs yourself. But, if you really don’t want the hassle of dealing with contractors, you could reduce your price by however much repairs would cost. Alternatively, you could offer to pay a portion of your buyer’s closing expenses with the idea they’d use the money they saved at closing toward doing the repairs themselves.

Either way, a concession can be a great way to meet in the middle. However, it’s important to have an agent on your side to help with these negotiations.

A good real estate agent can help you decide when and how to offer concessions, so you don’t give away too much while still ensuring your house gets sold. It’s all about finding the right balance.

Bottom Line

With the market becoming more balanced, seller concessions are coming back into play in some areas. The key is having an agent to help guide you through the process, so things work out in your favor.

Read more at Keeping Current Matters

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