If you're curious about that option or you like to file for specific performance, then prepare to open your wallet to your attorney to the tune of about $1K per week for 4-8 weeks, or longer.
Be wary of any suggestions to automatically turn to an attorney.
This may be coming to you a little late as it looks like you have moved on, which has its own rewards.
Everyone who has commented has done so without all the facts only you and your RealtorÂ® are aware of.
Was a Short Sale Addendum used?
Was the Buyer provided written confirmation of the Lenderâ€™s Short Sale approval by the end of Short Sale Addendum contingency deadline?
Both are key elements, and as such, your actions should be made in consultation with your RealtorÂ® and any other professionals you see fit to involve!
First and foremost, as this is a Short Sale with possible Fed/State tax implications, donâ€™t be penny wise and pound foolish. Rather than the Buyerâ€™s deposit, your focus should be on the close of escrow so you can move on; especially given the tax exposure if COE slips into 2013.
Given the Federal Mortgage Debt Relief Act of 2007 expires 12/31/12 any deficiency amount will be a taxable event for you provided the act is not extended into 2013. The consensus is this Act wonâ€™t be extended in 2012; however, â€œsometime in 2013â€ is a possibility. Keep in mind CAâ€™s tax treatment will also be driven by the decision and timing of any extension, or not.
Bottom line: donâ€™t bet on it!
I too agree with Michaelâ€™s comments. If the deficiency protection of the Debt Relief Act is not enough of a motivator to move forward quickly, the total expense (both in time and legal fees$$) going through the legal process may well be.
There may be another possible option:
Assuming the most recent CAR purchase contract was used, Para 26C(1) allows Small Claims Court action. CA SB 221 (became law as of 1/1/12) increased the Small Claims Court jurisdictional limit from $7,500 to $10,000 with two caveats:
A) The jurisdictional limit of the Small Claims Court will remain $7,500 for claims of bodily injury resulting from a car accident if the defendant in the action is insured and the insuredâ€™s policy includes a duty to defend, and
B) The Small Claims jurisdictional limit will remain $5,000 for suits brought by entities such as corporations, limited liability companies, partnerships and the like.
Personally, I would be very interested to know from a legal professional if you can release the deposit â€œwithout prejudiceâ€ to move forward and place the property back on market quickly; after which, you subsequently file a Small Claims action. Ask you RealtorÂ® to call CAR Legal for an opinion regarding this topic, the entire transaction; and/or, if you feel itâ€™s necessary, a legal professional.
â€œwithout prejudiceâ€ See http://en.wikipedia.org/wiki/Prejudice_(legal_procedure)
My standard answer is going to be "WHAT DOES THE CONTRACT STATE?". If you have a short sale addendum there are usually contingencies in there and it has to do with factors of time. Without being a party to the transaction we can only guess what your options are.
What ever was written into the contract also dictates the options. So read the contract. If you don't understand the contract, talk with the Broker of record or one can have a real estate attorney explain the contract to you.
In any event, one course of action is for the parties to move forward.
All the best to you.
Iâ€™ve read the question a few times and it sounds to me like it was a cash transaction â€“ if thatâ€™s the case, there would not be a lender involved. That might also be the reason there are no contingencies â€“ itâ€™s not uncommon in cash transactions â€“ especially in multiple offer situations where inspection reports are provided up front.
There are two common practices here in the Bay Area when it comes to the deposit â€“ and either option is usually spelled out on the Short Sale Addendum:
Option 1: Put the deposit in escrow only AFTER the short sale is approved by the lender.
In this option, there is absolutely no recourse if a buyer bails out of the transaction at any point because there is no leverage in the form of a deposit. If this is the case, put the property back on the market as quickly as possible, get another offer at the approved price and terms and submit it to the lender â€“ they may accept the new offer or they may want to start over again.
Option 2: Put the deposit in escrow as soon as the offer is accepted and BEFORE the offer is submitted to the lender for short sale approval.
In this case, there is a deposit so youâ€™d think there would be leverage â€“ however, since itâ€™s a short sale, there really is none.
In the case of a successful short sale, all the proceeds (including the deposit) go to the lender approving the short sale. No proceeds from the sale (or failure of a sale) can go to the seller (unless itâ€™s a HAFA approved transaction) â€“ including the deposit. If you obtain the deposit and then attempt to give it to the lender approving the short sale, they will simply return it. If, as the seller, you attempt to keep it, you can cause other significant problems.
There is another issue here as well â€“ in a short sale, time is of the essence: if you donâ€™t get the short sale approved in a reasonable time, the property will be foreclosed. Therefore, you donâ€™t want delays of any kind. When a buyer walks away from a short sale, you need to get the property back on the market as quickly as possible. If you try to go after the buyerâ€™s deposit, youâ€™ll need to sign a Cancellation of Contract form that specifies that the deposit goes to the seller AND youâ€™ll have to get the buyer to sign off on it. The transaction is not over and you cannot enter another transaction UNTIL the buyer signs the cancellation. If the buyer disagrees that you have a right to the deposit, they can refuse to sign the cancellation knowing that, since you cannot remarket the property, at some point, it will be foreclosed, the transaction canceled, and their deposit returned.
Your recourse? None.
Our recommendation? Get the property back on the market as quickly as possible and, if there is a deposit, get it back to the buyer as quickly as possible as well. You'll need them to sign the cancellation to release the deposit - don't delay.
It is also possible that the expiration of his offer expired in terms of the short sale addendum or the approval did not come back exactly to his offer.
Like mentioned before, if he backed out right at the approval you probably don't have a shot keeping his money.
And whoever his agent is that let him put money into escrow without an approval should be fired.
At your service,
Certified Distressed Property Expert
It shouldn't be too difficult to attract a new offer--you already have an approval.
You'll likely be able to close with a new buyer sooner and with less frustration than taking that cash buyer to court.
Unless the contract specifically stated that the earnest money deposit would be non-refundable, then its easier to just give it back and keep it moving. The question you would have to answer if you were to go after that deposit is: What financial losses have you experienced as a result of this buyer walking away from this deal?
Good Q&A. Micheal nailed this one.
Seems you might have a case so long as the lender provided you with an approval letter BEFORE the contract expired.
There should have been one contigency in that contract: subject to lender approval (or whatever verbiage the lender required).
Its not so easy for a cash buyer to weasel out of a purchase. Your attorney will have a field day with this one.