Home Buying in Orange>Question Details

Calvin Nguyen, Home Buyer in Lake Forest, CA

How can we get our deposit back because we did not qualify for loan?

Asked by Calvin Nguyen, Lake Forest, CA Wed May 9, 2012

We made $3000.00 deposit for the house we made offer. We could not get the loan and our escrow expired. We signed extend 2 weeks escrow, paid $50per day. And still could not get loan. The seller wanted to terminate the escrow and refuse to return our deposit. How can we get it back?

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I am a retired real estate broker who returned to help her son buy a home. I am upset with the current contract used and written by Calif. Association of Real Estate. It allows the seller to keep your deposit even if you do not obtain the loan, get the appraisal price, or if you find a serious problem on a home inspection. The normal Buyer's rights I worked under for years have been removed. Buyers are exposed to the loss of their deposit in ways I have never seen before. Perhaps consulting an attorney before writing an offer would be a good idea.
0 votes Thank Flag Link Fri Apr 10, 2015
After reading the comments below, I have to say, you got lucky Calvin :) I highly recommend to any future buyers reading this post, read the replies to the answers below. The biggest takeaway here is make sure your loan is squared away BEFORE making offers and not to remove the loan contingency until you actually have the loan.

The purchase contract has a paragraph that protects the buyer from this exact situation...unless you remove it.

This could have cost Calvin thousands, especially since you agreed to an additional $50 per day penalty.

I'm glad it worked out, best of luck.
0 votes Thank Flag Link Thu Sep 6, 2012
When you signed the sales contract it was contingent to get a mortgage? If that is the case, with a letter from the lender explaining why you did not get the loan, will be enough to get your money back.

Check the sales contract that you originally signed.


Maria Cipollone

0 votes Thank Flag Link Thu Sep 6, 2012
If you had a Mortgage Contingency in my area your money would be refunded with a letter of explanation/rejection from the Mortgage Lender.
0 votes Thank Flag Link Sun May 20, 2012

This matter should be discussed directly with your agent. Without seeing the actual contract, it would not be right to assume how it is written - and I cannot interfere with the agency relationship created by the offer with your agent. You should go ask a real estate attorney - for FREE advice, ask your agent, then ask his/her broker if you don't feel they have a grasp on the situation.

What kind of sale is this? REO? Short Sale? Standard?

When was your offer accepted?

What did the contract specifically say about the deposit and non-performance?

Where you pre-approved before you entered into the contract? If so, what happened to disqualify you?
0 votes Thank Flag Link Sat May 19, 2012
If your contract stipulated that you were to remove the loan contingency within 17 days of acceptance and you failed to do so, chances are your deposit can and will be held as liquidated damages.

Kawain Payne,Realtor
0 votes Thank Flag Link Sat May 12, 2012
This totally depends on how your contract was written. Review your contract and if you do not understand it contact your buyers agent to review it with you.
0 votes Thank Flag Link Thu May 10, 2012
Sounds like your contingency period ran out and you were not advised that you were locked in. You may have to go to small claims court to argue that you were not aware that the contingency period for the loan was 17 days also and you were not advised that you should have cancelled before the period ran out. It could go either way, but it is a chance.
0 votes Thank Flag Link Thu May 10, 2012
Your agent can explain the details of your contract best. If you did NOT remove your loan contingency you should be able to get it back but the seller must release it. If your agent doesn't help, contact the escrow company - they are the independent 3rd party.

Good luck !
0 votes Thank Flag Link Wed May 9, 2012
hi Thom ,i contacted the escrow co. She said she could not help any further so suggested me to call the seller directly since my agent was on vacation out of state. but he did tried to contacted the seller and requested to release the deposit as we agree to cancel the the sell and re -submit our offer again. Goodnew the seller finally agreed to release our the deposit since he has multiple offers for that property. Thank you for your comment.
Flag Sat May 19, 2012
Calvin, I just read your response to Ann Harris. Since your removed your Loan contingency, the seller could actually force you to "perform" and buy the house. You removed the only safety net you had. Where is your agent? They should be helping you with this !
Flag Thu May 10, 2012
Thank you for your opinion. I will contact the excrow company.
Flag Wed May 9, 2012
If you canceled before the contingency was removed, you would of gotten your deposit back?
You can refuse to sign the cancellation of escrow. But you are not entitled to the deposit. If the seller takes you to court you will most likely lose.
It is extremely important to have your loan in order, prior to making an offer.
It looks like you may learn this the 'hard way'.
0 votes Thank Flag Link Wed May 9, 2012
Hi Ann, you are right . The seller agreed to release our deposit since he has multiple offers on that property as we offered to cancel the the sell and use that deposit to resubmit offer again. So far, we don't think we can get that house but at least we can get our deposit back if the seller did not accept our second offer this time. We were relieved with this good new. Thank you for your tips.
Flag Sat May 19, 2012
I am sorry. There are way too many shady loan officers out there that do not seem to understand contingency periods or sale transactions are extremely time sensitive. I try to tell my buyers to use a direct lender who is accustomed to handling purchase loans. Preferably one they or I have used before.
The market is so hot right now; the seller may have another buyer soon and agree to release all or part of your deposit so that they may move forward with the new buyer on the property. It's worth a try.
Good Luck to you!
Please feel free to call or email me directly.
Flag Fri May 11, 2012
Thank you, Ann. for your answer. Unfortunately, we signed the contigency removal during loan process since we thought we would get the loan. Our loan guy made promise that we would get the loan so we believed him signed the contigency removal as the seller requested. Is there any other way we can negotiage with the seller ?? Hope you can help.Thanks so much.
Flag Wed May 9, 2012
Read your contract, contact your agent and ask them the question. Release of funds are between the buyer and the seller.

Good Luck
0 votes Thank Flag Link Wed May 9, 2012
Depends on how your contract is written....
0 votes Thank Flag Link Wed May 9, 2012
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