Home Buying in Los Angeles>Question Details

aniinem, Home Buyer in Los Angeles, CA

Hi, I recently canceled an escrow, and now our broker tells us that we have to pay 1%of the total worth of the house as a cancellation fee is it true?

Asked by aniinem, Los Angeles, CA Tue Nov 20, 2012

we haven't signed ANYTHING yet, we just gave them a cashiers check for $40.000 and now the broker is holding our check (that she cashed in) and isrefusing to give it to us because she says we have to pay a cancellation fee that is 1% of the total of what we bid on the house (in this case $3000!!) , I'm a first time buyer and I don't know what to do! We canceled the escrow 3 days after we gave the check. Please can someone tell me what I can do?

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Answers

19
Carlos Parrague’s answer
This does not sound tight. Typically you have 17 days to make a final decision and you can cancel without penalty. Are you working with a broker or an agent? Ordinarily I would say talk to the Agent's broker but if you are dealing with him direct, I would suggest you talk to the California Department of Real Estate (http://www.dre.ca.gov)
1 vote Thank Flag Link Wed Nov 21, 2012
BEST ANSWER
Give me a call (even now) 818-967-9626. You have to look at your contract and escrow instructions. You have contingency periods and this doesn't sound right. I need more details before I can guide you. Feel free to call me before midnight tonight or after 6:30am. Good luck.
0 votes Thank Flag Link Tue Nov 20, 2012
This depends on the reason WHY you are cancelling the escrow. Once you have signed the purchase agreement you have AGREED to purchase the property with SPECIFIC contingencies that allow you to back out without losing your deposit. "Changing your mind" is NOT one of those contingencies. You need to read your contract thoroughly and understand the terms!! I hope since you are a first time buyer you were smart enough to have your own agent. They should be assisting you and explaining the proper way to go about cancelling an agreement.

I am surprised how little people understand the contracts that they sign. People, you have got to read your contracts! AND, if you don't understand something get your agent to explain it thoroughly!!
1 vote Thank Flag Link Tue Nov 20, 2012
You're right Jeffrey! 100%
Flag Fri Nov 23, 2012
Oh please, the buyer can simply change their mind. During the first 17 days, the buyer can simply wake up with a headache and decide not to buy. Buyer cancels and gets their EMD back.

Read what this poor person said. They signed nothing! Hello?

RUN TO AN ATTORNEY. STOP TALKING TO AGENTS or BROKERS.
Flag Fri Nov 23, 2012
as I said in the description,I have not signed ANYTHING, haven't even seen the contract, we backed out 3 days after giving the check to escrow. There is no contract signed and therefore I should be able to change my mind right?
Flag Tue Nov 20, 2012
What did you sign? Did you make an offer on a CAR Residential Purchase Agreement form? Revert back to your agreement. Was escrow actually opened?

You usually have contingency periods in which you can back out of the purchase within that time frame. When did you sign the agreement and open escrow? How long after opening escrow did you want to cancel?

Contact a Real Estate Attorney and make a complaint to the Department of Real Estate. If there is nothing signed by you at all, they should not have cashed your check and if they did, the funds must be put into an Escrow Account and held until the actual deal was accepted and escrow was opened...then the funds would be transferred to escrow.

Never give your broker a cash or cashiers checks...that needs to be paid directly to escrow. Something sounds a miss.

Good luck!
Kat
0 votes Thank Flag Link Sat Nov 24, 2012
STOP TAKING TO AGENTS IMMEDIATELY and go to an attorney. Agents got you in this mess.

If you are still unsure, read the first ten words of my answer.

After this gets cleared up, never forget that everyone involved in the house buying transaction works for the seller, including your buyer agent and it doesn't matter what they tell or promise you. This very types of questions show how badly the real estate industry is stacked against buyers.

Get a lawyer. Now. Right now.
0 votes Thank Flag Link Fri Nov 23, 2012
I agree that this person needs a lawyer but it's not true that buyer agents are working for the seller. It "used" to be the case..but not anymore since Buyer Agency came into effect. Sorry you had a bad experience, but there are Realtors with integrity who do represent their buyers!
Flag Fri Nov 23, 2012
Dear Aniinem,

I'm sorry you are having this problem, please check your contracts to see what your obligations and rights are. There are some circumstances where you will lose your good faith deposit so perhaps that is what is happening here?
It sounds like you do not have your own "Buyer Agent' to assist you, so in this case I would recommend you contact an attorney who's specialty is Real Estate Law.
0 votes Thank Flag Link Fri Nov 23, 2012
Key information must be missing because it doesn't sound right that you deposited $40,000 without having a signed agreement. Is this broker working on your behalf or as dual agent? Have you asked or been told what item in the contract says that you owe 1%. That is the place to start. If no one can show you then you ask for your deposit back in writing. If there is a clause in the contract that says you owe 1% then you should go to your agent's broker and ask for explanation. If this doesn't work you should seek legal counsel.

Unless the sale involves a foreclosure there is very high risk when using a dual agent.
0 votes Thank Flag Link Thu Nov 22, 2012
Was this an auction? There's a lot of missing information here.
What would you give a broker a cashiers check and not to escrow? Something's not right as information is not disclosed.

Good luck
0 votes Thank Flag Link Wed Nov 21, 2012
If you have not signed an exclusive buyer-broker agreement, you owe nothing to your agent.

If you canceled the escrow within your first 17 day inspection period, you probably owe the seller nothing., If you canceled after the 17 days, you will owe the seller something.

The details are in your contract...so read them over and get a lawyer if necessary.

I suggest speaking with the manager at your broker's company to resolve this. If your broker is the actual broker of the company, then go to your local association of Realtors or do a consultation with a real estate attorney.

I'm really sorry this happened to you.

Take care.
0 votes Thank Flag Link Wed Nov 21, 2012
We cannot help you without seeing your contract.

A real estate attorney can help you to scrutinize your situation.

Ask a legal question and get a free reply from experienced attorneys at http://bit.ly/10elRnx

Good luck.
0 votes Thank Flag Link Wed Nov 21, 2012
If escrow was opened, they should have your funds. If the broker failed to turn them over that may be one violation. First, call escrow directly--as they will only release funds as provided in writing (though it should be without penalty). Demand (in writing) the broker prepare cancellation papers without the 1% penalty, and if they cannot/won't produce it, go straight to the Dept. of Real Estate. Oh, and I hope it goes without saying (but I will) certainly never do business with them again!
0 votes Thank Flag Link Wed Nov 21, 2012
Send me a copy of the contract you signed as it will spell it all out. Was this an auction? Something isn't right. No one can advise you as it is all speculation without reviewing the contract you signed? Let me know if I can be of any assistance to review what contract you signed and advise?

Why did you cancel and are you still in the market? Do you have satisfactory financing? What are your fico's and how much down are you intending on putting into the purchase. I offer CHF Access half percent down payment with a minimum 580 fico score to qualify if down payment is an issue. Let me know...

http://www.under640ficoscoreloans.com/Pages/ContactSheryl.aspx
Sheryl Arndt, Real Estate Broker – Sr. Loan Officer CA only
REO & Short Sale Specialist
20+ Years Experience
DRE# 01140252
NMLS# 297251
760-486-4225
0 votes Thank Flag Link Wed Nov 21, 2012
There is so much we do not know regarding this situation.
What we do know is you have become a victim of an organization that is predatory in nature.
Each agent responding, including myself, take such events personally. This IS the face of real estate that we all wish would go away. But, they are allowed to exist in the effort of creating consumer choice. When there is a broad spectrum of choice, it becomes more confusing to know what one is choosing.
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It is very likely the brokerage with whom you are working is using contracts they have developed. Their name and logo will likely appear on the header. Such contracts often deviate from the provision of the 'standard' state issued contracts available through the state websites. These are the contract most of us use to assure the consumer there is no transgression embedded in that wall of words. Although we all repeat, "You must read the contract" I have yet to witness ANYONE read all nine pages of a purchase contract. To be honest. many agents have not read every line of all nine pages.
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With out seeing what yo signed, and you did sign something when you submitted the escrow and signed more when you submitted the purchase offer, your options are not known.

Give Caroline a call ASAP and see what your options are.
Best of success to you,
Annette Lawrence, Broker/Associate
Remax Realtec Group
Palm Harbor, FL
727.420.4041
http://RealEstateMadeEZ.us
0 votes Thank Flag Link Wed Nov 21, 2012
I really appreciate those of us who are in this for the right reasons. As times get tough, people tend to do things a little out of line. I'm going to do everything I can to help.
Flag Wed Nov 21, 2012
It sounds to me as if your Broker is trying to shake you down. I'd suggest the following: First call the CA state real estate commission: 1-877-373-4542 their website is http://www.dre.ca.gov/ speka to their legal/consumer affairs department and explain the situation and ask their advice. My guess is they will encourage you to file a formal complaint (which you absolutely should)

Next ii'd call your state attorney generals office here's a direct linkto their website page specifically about real estate issues: http://oag.ca.gov/consumers/general/real_estate_agencies_agents

Lastly I'd call your broker back and tell her that you've already called the State Real Estate commission and the attorney general's office and filed a formal complaint against her and her firm and that you're coming in to her office to get your full $40,000 check and that it had better be ready when you get there.

I'm truly sorry you're having the issues you are. Most Realtors don't behave this way and if you've signed no agreements or offers, then there's no reason I can imagine that you'd be responsible for any charges or fees. (Even if you had signed a buyer broker agreement and a formal offer i still can't think of any reason you'd be charged a 1% cancellation fee, with decades of experience as a full time Broker I've never heard of such a thing.

You need to find yourself a good experienced Buyer Broker and I've attached a link below on how to do this.

I wish you the best of luck and a happy Thanksgiving. I wouldn't worry about this, you'l get all your money back. I do hope you'll follow through with a formal complaint as agents who act like this and agencies that permit such behavior should not be allowed to operate.
0 votes Thank Flag Link Wed Nov 21, 2012
You need to seek legal advice ASAP. Never write a check to a broker. It should always be to escrow who is a neutral party.
The Ca. Purchase agreement does not call for a 1% cancellation. I do not know what you have signed so far.
Unfortunately it sounds like you are being taken advantage of so I would seek legal advice and talk to the Ca. Association of Realtors.
Web Reference: http://www.LauraCoffey.com
0 votes Thank Flag Link Wed Nov 21, 2012
Go to an attorney immediately. Unfortunately, there are agents around who make stuff up and try to stick clients with the bill. An attorney will be able to tell you if there is a cancellation fee in the contract and guide you as to what legal options you have to recover your money. If this agent is attempting to commit fraud, it's better for you and the real estate profession if they are prosecuted to the full extent of the law and lose their license.
P.S. No standard contract forms have a automatic cancellation fee and there is no law that says you have to pay one. But that doesn't mean this agent didn't sneak one into the small print.
0 votes Thank Flag Link Wed Nov 21, 2012
Your best bet is to refer to the contract you signed. All stipulations and conditions should be outlined in the contract.

If you have trouble understanding the terms of the contract, you should contact an attorney. You can also ask the broker to point out to you where in the contract the cancellation fee is stipulated.

Best of luck!

Chad Gray PA, Realtor
Luxury Living Fort Lauderdale
Coldwell Banker Residential Real Estate
754-300-6040

100% of clients rated our service as "EXCELLENT"!
http://luxurylivingfortlauderdale.com/what-clients-are-saying/


.
0 votes Thank Flag Link Wed Nov 21, 2012
Who on earth are you dealing with here? No way no how do you have to pay a penny unless you signed some crazy contract. I presume you mean $300,000 not $3,000, in which case your deposit should not have been more than $9,000. And brokerages cannot cash checks, only hold them in an escrow account or actually pass them on to escrow. You may need to consult a lawyer if you cannot get this resolved.
Web Reference: http://www.homejane.com
0 votes Thank Flag Link Tue Nov 20, 2012
we made a $290,000 offer on the house that got accepted. our broker is telling us that we need to pay 1% of that we offered as a cancellation fee (which is $2900). But as I said, we havent signed the contract or anything yet nor did we get informed of this "cancellation fee"
Flag Tue Nov 20, 2012
Without seeing the contract or if you had contingencies we cant help. plus we cannot give legal advice. small claims might be an opinon if seller holds deposit. next time contact me at 818-426-1700 to.help with your purchase

Erik
0 votes Thank Flag Link Tue Nov 20, 2012
but if we didn't sign the contract how can any of this be happening? They cant have started the escrow without us signing off on it (which we didnt) we havent even seen the contract yet, we changed our mind right after we gave them a check.
Flag Tue Nov 20, 2012
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