Home Buying in 92705>Question Details

Being Outman…, Home Buyer in 92705

Does seller have grounds to hold our (buyer) deposit due to unforeseen circumstance in loan phase so we cancel escrow due to loan contingency?

Asked by Being Outmaneuvered, 92705 Thu Nov 4, 2010

we (buyer) gave seller a preapproval letter which i know is a cursory review of our financials. there was a reporting error showing up in the footnotes. apparently these footnote errors did not affect our credit score (800) so it didn't flag our lender to comb the credit detail before he wrote the preapproval letter. Also a brand new reporting error showed once the first error was cleaned up. Our lender has not seen this in 18 yrs of business. All this rescoring is causing us delay in escrow. if we cancel escrow saying we can not get a loan in time of escrow, does the seller have strong arguments to hold our deposit and what would they try to do? they are trying to charge us per diem too.

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Dear Homebuyer,
You have more than one issue here. You say the seller is now asking for a per diem. So that sounds like you have requested to extend your time. We don't know what exactly your contract says. If it was not changed from the origional verbage, then you likely have 17 days to remove your loan contingency. If you are asking for extension you must be beyond your 17 days. If so has the seller already sent the notice to preform? This is very important to you at this point. If they have not, you may have a few additional days until they send that in writing. You say you are only a few days away from closing. I hope you get your loan straightened out in time to close before you are asked to preform. Once that notice is given to you, you have only 24 hours before the seller may rightfully ask for cancellation. They may not just demand per diem if it is not already stipulated. However; if you are out of your contract time; and they have given proper notice, they may require that in order to grant the extension. If you don't agree, they do not have to give it to you. Many times sellers will do things like this just trying to get all involved with the process to speed it up and preform. Hopefully this seller wants to sell and does not want to wait for another buyer. Remember you are at risk of losing deposit funds if you are out of time with your contingnecy, so maybe a per diem will be the best way to go!
You need to get on the lender and get them to preform, that will fix this problem!
Best of luck with this,
Connie Bramble
Prudential CA Relty
0 votes Thank Flag Link Sun Nov 7, 2010
If you want to back out on a Loan Contingency, you need to have a DENIAL OF LOAN Letter from that lender to show proof you cannot get the loan as described in your Purchase Agreement.
0 votes Thank Flag Link Fri Nov 5, 2010
You really need to be discussing this with your agent but, if you have not removed your loan contingency, and you really want to get out of the contract, you need to fill out a CAR from CC "Cancellation of Contract, Release of Deposit and Joint Escrow Instructions" . Your agent should have this. This needs to be given to escrow and I would give a copy to the Seller, or seller's agent as well. Seller will have to agree to release the deposit from escrow.
0 votes Thank Flag Link Fri Nov 5, 2010
Per diem is not in contract. Seller is now demanding per diem even though best case scenario would just be a week delay. Not an REO or short sale. Rate lock will likely expire before close. We are backed into a corner with per diem demand and potential more charges with rate lock. Loan will not be approved in time of current close date. Loan contingency not removed yet so want to know our options of cancelling with least risk.
0 votes Thank Flag Link Fri Nov 5, 2010
You need to review your contact or get someone very knowledgeable to help you…perhaps a lawyer. You mentioned per diem charges which are not normally found in a standard California real estate contract. Did you agree to per diem charges in your original contract or are the per diem charges included in an addendum that you sighed for the seller who is selling you a short sale or REO property? Many REO contracts change contingency release from active to passive meaning that your may have released your contingency whether you wanted to or not! If you do not know, get some help. Only someone familiar with your contact is in a possession to give advice to you.
0 votes Thank Flag Link Thu Nov 4, 2010
You've received some great advice -
Just curious - what did your Realtor say about the delay, the potential per diem, and the risk of losing your deposit? Have you removed your loan approval contingency in writing? In California, there is no Passive Rremoval of Contingencies - it must be in writing. Have the sellers served you with a "Notice to Buyer to Perform" with the threat of cancellation if you don't remove the contegencies? When does your mortgage interest rate lock expire?
Unless the sellers have back up offers, with buyers who are pre-approved and still interested, they will probably grant an extension of the close of escrow. If it is an REO, despite what is in the RPA, the Addendum A from the bank will prevail - there may be a per diem in the bank addendum. All this will be in your Escrow Instructions. Ask for an extension on the close of escrow if you need it and ask for the per diem to be waived. And just be prepared - if you do cancel, they may deduct a cancellation fee, and out of pocket expnses (like HOA docs) from your deposit.
Hope this helps.
Leslie Eskildsen, Realtor
As seen in the Orange County Register: http://www.ocregister.com/articles/mumbo-263352-jargon-jumbo.html
0 votes Thank Flag Link Thu Nov 4, 2010
If you have not released loan contingencies, and you want to cancel escrow, then you should be able to get your deposit back. You asked about the per diem earlier in another question and it was answered. You need to read your RPA and find out if there is a per diem charge agreed to by both parties.

You should contact your agent and ask her/him these questions. From your other question, it sounds like you don't have faith in your agent. You should go the the broker of record who the agent "hangs thier license" with and discuss your dilemma, if you have lost faith in the agent representing you.

Good Luck!!
0 votes Thank Flag Link Thu Nov 4, 2010
Your contract contains the terms by which your question can be answered. In my state we have a standard financing contingency form which would allow a return of earnest money if financing fails for any reason, provided the buyer makes a good faith effort to obtain financing.
In similar situations to yours, the seller would be advised to give you more time ( a few days) for your lender to resolve the unforeseen issues you are dealing with. For them to put the home back on the market could mean weeks of waiting for another offer, unless there is already a back up offer in place.
0 votes Thank Flag Link Thu Nov 4, 2010
your contract may have a per diem in it. Based on your contract it will dictate how your deposit will be handled. If your loan is denied (unable to get final approval) you should be able to cancel and receive deposit back (in AZ contract). If you are at 800 score that shouldn't stop your ability to get a loan though so some data is unclear. Up to 740 score should get premium rates. You could ask for extension to close of escrow but seller has to agree and the per diem is negotiable if not already in contract so just say no. If seller cancels you should get deposit back to. I can't say for sure since I don't have your contract but those are some things to think about.
Best of luck
Laura Myers
0 votes Thank Flag Link Thu Nov 4, 2010
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