Maryland Governor Larry Hogan has signed into law HB 1183, which provides protections to new home buyers who are unable to secure a loan commitment to permit them to proceed to closing. The new law, which relates only to the initial sale of new homes, amends Section 14-117 of the Real Property Article in the Annotated Code of Maryland concerning loan contingencies in new home contracts. It provides that all new home contracts must be contingent on the purchaser obtaining a loan commitment. Additionally, the contract must state the maximum loan interest rate the purchaser is obligated to accept, and the time period in which the purchase must obtain a loan commitment. If the purchaser does not obtain a loan commitment within the stated rate limit and time period, either the seller or the purchaser may declare the contract void. Any deposit is to be returned to the purchaser.
Specifically, it is provided that the seller may elect to declare the contract void, leaving the seller the option to allow the purchaser additional time to obtain a loan commitment. The purchaser is entitled to declare the contract void regardless of the seller’s position, upon providing the seller with written documentation from a lender evidencing the purchaser’s inability to obtain a loan in accordance with the terms of the contract.
In the event that either party properly declares the contract void, the seller must return any deposit paid, provided that the purchaser has otherwise complied with their obligations under the contract. A deposit held by a licensed real estate broker is to be distributed in accordance with Section 17-505 of the Business & Occupations Article of the Annotated Code of Maryland