Home Buying in 35242>Question Details

Coxst, Home Buyer in Birmingham, AL

Can the seller keep our Earnest Money?

Asked by Coxst, Birmingham, AL Wed Jun 30, 2010

Our ReMax contract has a clause stating no matter what the rest of the contract says, we would not lose earnest monies or pay any other penalties if the VA did not provide us a notice of valuation of at least the purchase price. The contract included “must close by” date of 6/30. We set a closing date & the bank sent the paperwork, even though they had not received the "clear to close". On the day of closing, the bank canceled the closing saying the appraisal had issues. The bank pres provided a letter for the sellers indicating they had final credit approval on us & were only waiting on satisfactory collateral (i.e., the appraisal & underwriting of such). The closing delayed several days, and the underwriter declined saying the appraisal did not meet their standards. The bank tried another underwriter (investor). About 10 dys after the original sched'd close, the sellers said they had enough & they took the house off the market. They are keeping our money. Can they?

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Answers

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It depends on the contract that you signed and what the contingencies were.

Also, look at the transaction from the side of the seller. How long did the seller have to pull the property off the market? If the owner had pulled the property off the market for 10 days then you would be within a reasonable period of time. If the owner had pulled the property off the market for 90 days while the VA was doing their work only to have it fall apart at the last minute then the owner has lost 90 days of marketing and made 3 mortgage payments.

If you and the seller cannot come to an agreement then you would ultimately have to go to court to get your money back but it could easily cost you 1k-2k in attorney fees.

How much earnest money did you put down?
0 votes Thank Flag Link Mon Apr 11, 2011
Read your contract, write down all of your questions, and call your agent and broker for a meeting. Were all contingencies removed by you? If so, you may be out of luck. Also, as said by others, your money is likely still held in escrow. Escrow can only disburse money when BOTH parties give the same instructions; if there's a conflict money is held until agreement is reached.
0 votes Thank Flag Link Sun Apr 10, 2011
Review the contract as the answer can be found in the document--also consider consulting with an attorney who specializes in real estate, have all related documentation reviewed and go from there--your attorney will be your best source of advice.
0 votes Thank Flag Link Tue Jul 6, 2010
First of all, were you represented by a Realtor as a Buyer?

Vicki Williams, Accredited Buyer Representative, Realtor, BS
ReMax Advantage
205-492-7072
0 votes Thank Flag Link Tue Jul 6, 2010
You need to have an attorney review your contract and any extension you may have signed once the first underwritter did not approved your loan due to the appriasal issue. You should have filed a written extension and in order for the owners to keep your earnest money, that extension had to of had a non refundable clause within it somewhere in order for the owners to have kept the earnest money past your original closing. If you were not working with an agent and moved forward without a written extension and conditions then you may not be able to get your earnest money back, but you have to challenge that in writing through the judicial system in your state and I will assume your earnest money was held in trust with a Title Company and once they know there your are contesting the return of your earnest money then the Title Company should place the money with the courts if you have filed proper papers through the courts. If the earnest money was not held in trust and given to the owner themselves, then you have a legal battle no matter what on your hands to get your earnest money returned.
0 votes Thank Flag Link Thu Jul 1, 2010
Also note, the earnest money can not be released until a Release Form has been signed by you.

I agree with Charita, have your agent set up a meeting between you, your agent and your agent's broker.

Good luck!
Web Reference: http://www.pauld-kw.com
0 votes Thank Flag Link Thu Jul 1, 2010
Probably, and you have other options that might work for you as well. For example, you could buy with a lease-option, and cash the seller out in a few months.
0 votes Thank Flag Link Wed Jun 30, 2010
We're not going to be able to adjudicate this here, Coxst. My guess is that the Sellers do have the right to turn you loose, and probably don't have a claim to your earnest money.

I'm also guessing that they don't actually have your earnest money, but it is being held by the closing office?
0 votes Thank Flag Link Wed Jun 30, 2010
That all depends on the language in your purchase and sale contract. You may want to consult an attorney.

Has the bank now approved you for the mortgage? It's a shame to have come this far and have it all fall apart, If the appraisal is close to the contract price, the best solution would be for you and the Seller to agree to the appraised value in writing and everyone to proceed to closing.

You don't mention whether you and the Seller signed an extension of the contract. If you are now beyond the latest closing date in your contract, then you and the Seller would need to either agree on a new sale price and closing date, or both sign a cancellation of contract and release of deposit.

Your earnest money deposit is most likely being held in escrow by either your real estate agent's company or the closing agent (title company or lawyer). If you and the Seller have a dispute over the funds, this should be resolved before the funds are disbursed. Different states have different procedures that must be followed if the funds are held by a real estate company.

What does your Realtor say about all this?


All the best,
Maggie Hawk, REALTOR
(386) 314-1149
Watson Realty Corp.
0 votes Thank Flag Link Wed Jun 30, 2010
It sounds like you may be referring to the FHA/VA Amendatory Clause which serves as an addendum to the sales contract. The logic here is that your earnest money will be returned to you, in the event, the loan does not receive final approval.

If there had been sufficient warning that the closing would not take place on schedule, then ideally an extension addendum should have been added and the terms of the earnest money would have been clarified in the addendum.

Not knowing the full set of circumstances, it may be likely that your contract called for the seller to be notified if you were changing lenders. If this is the case, this could have changed everything.

You should have a discussion with your real estate agent and have your agent review the contract with you regarding to the earnest money. If the agent is not the broker, then perhaps your agent should get her broker involved if you feel that you did everything possible (on your part) to ensure a close.
0 votes Thank Flag Link Wed Jun 30, 2010
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