Home Buying in 78664>Question Details

Mattie, Home Buyer in Austin, TX

Does the buyer have the right to get their earnest money back if they back off 2 days before closing date?

Asked by Mattie, Austin, TX Fri Aug 31, 2012

I am the seller and our closing was scheduled today. I learned from my realtor 3 days prior to closing that there is a big chance that our house will be put back to market as the buyer has issues with their loan approval with the underwriter. We had already booked to stay in the hotel, had emptied our home, had enrolled our kids to another school. We were very dismayed. Our realtor asked us to take a photo of our empty home with date on it to prove that damage has been done to us therefore we can get their earnest money. Do they have right to fight for that earnest money?

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Answers

5
I agree with the points Edwin makes about financing and will add in Title/Survey/HOA review periods may also apply. Everyone involved will have to go with what is in writing in the contract. Terms are just as important as price and financing and they all apply as written. The facts will set you free or not regarding the earnest money. I often try to get additional earnest money for closing extensions when representing sellers. If buyer flakes over this they probably weren't a real buyer.

If the buyer is truly in default, then the seller is generally entitled to the compensation. It is generally in the buyers best interest to offer the earnest money as a way to cut loose from the transaction and avoid being sued for triple damages, moving costs, and attorney fees.

Please post how it turns out. These kinds of contact concerns are very important in our industry.

Best of Luck,

Greg
1 vote Thank Flag Link Fri Aug 31, 2012
This situation is very frustrating to both the Sellers and their agent. But unless we (the folks here that volunteers to answer your questions) know the full situation and how the situation develops, we cannot really give you a fair answer as there are always 2 sides of the story. Not to mention the legalities of the contract.

As you can see, it is very easy for some of us to say YES you are entitled, NO you're not and it Depends.

As the respondents said, I am sure your agent explained the contract to you and answered your questions as it develops. This is part of your agent's job. Whether you believe him or not is a different story.

If your agent knows his stuff, I am sure he is working diligently so you can retain the earnest money. He asked you to take photos with dates to help you case. They can still go after it if they want to. If they decide to go to court with that earnest money, nothing can prevent them from doing that regardless if they are right or wrong. But is it really worth it? remember that you cannot put your home in the market if it goes to litigation/court no matter who is right or wrong. We have to pick our battles.. is it worth it or not?

I highly suggest you discuss this with your agent. He is there to answer your questions. As here in Trulia, we only know part of the story...

I hope your home is priced right so you can capture more buyers that are eager and ready...


Best of Luck,

Sam Gabilagon
BROKER, CRS, SRS, ABR, GRI, CNE, GREEN, REO/SS CERTIFIED

512-887-2595
RSVP REALTY ONE, LLC

http://www.rsvpaustinhomesearch.com
0 votes Thank Flag Link Sun Sep 2, 2012
It sounds like the Buyers and their Agent did not handle things correctly.
I would say, YES!
But it will depend upon what it says in your Contract:
Have your Realtor go over it with you.
0 votes Thank Flag Link Fri Aug 31, 2012
As a lender, I always worry when the sellers move out early. There are so many issues involved in loan approvals these days that it can be touch and go all the way up to the closing. I believe the purchase agreement usually gives a date that their loan needed to be approved by. After that date, the earnest money can be at risk even if the loan is denied. Low appraisals for FHA and VA loans can negate that though. Earnest money release forms are involved, so I suggest you get with your agent. And it never hurts to have another lender look at their application because it might be a gray area for the denial.
Good luck!
Barbara Coker
NMLS#228545
Licensed Mortgage Loan Officer
100% Home Loans All Over Texas!
0 votes Thank Flag Link Fri Aug 31, 2012
what if its the other way around . im the buyer the title company got me ins title i call them back told them i wanted a warranty title. pack ready move in quit my job (new house was 87 miles away. start new job in 2 weeks) time was great. then found out it was will and the will was not probated. now what i do now ? what about the money i was out of ? not just earnest money
.
Flag Sat Sep 1, 2012
hi Barbara, we never moved out early. We were set to move 2 days before closing when the realtor told us about the problem. All our stuff are already in the storage. To add up to our dismay, we also are set to close on the home we are going to buy in 10 days. My lender offered to help our buyer but they opted not to pursue this. I wonder if my realtor missed something here. As a seller, I can't help but get disappointed but I guess this is not something my realtor can control. Am I right? Could he have prevented this from happening?
Flag Fri Aug 31, 2012
This should be stated very clearly in your contract. Since there is a loan involved, there should be a 3rd party financing addendum which outlines these details. Make sure your Realtor understands this and explains it to you. (This is part of his job by the way.)

However, even if you are 100% entitled to that earnest money, the title company needs both parties to sign a release of earnest money form. So they can simply refuse to sign it if they wanted to. It's dumb and needs to be changed, but that's how it works for now. Your Realtor or his broker really needs to know his stuff at this point to fight for your money.

Good luck!
0 votes Thank Flag Link Fri Aug 31, 2012
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