Bill, Home Buyer in 60622

I paid 5% earnest money to the seller’s attorney. Can I walk away without any penalties and get my 5% back?

Asked by Bill, 60622 Mon Jun 16, 2008

I entered into contract to purchase a codo, however the appraisal came back about 3.5% less the contract price. My realtor and attorney are going to take the appraisal to the seller and try to negotiate a lower price, however I do not expect to make much ground. I was planning on putting 20% down, however the bank’s loan to value would be based on the appraisal amount and I would have to bring the entire 3.5% difference to the table or pay PMI. I fill I have the upper hand with the seller, in that another unit in the building next door has been seating on the market. I have already paid 5% earnest money to the seller’s attorney. Can I walk away without any financial penalties and get by 5% back?

Thanks

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Answers

4
Your own legal team is the only one that can properly advise you on this.
Web Reference: http://www.realtybob.com
1 vote Thank Flag Link Wed Jun 18, 2008
If you're using the standard multi-board 4.0 contract, often used in our area, it contains a clause that reads:

"If Buyer, having applied for the loan specified above, in unable to obtain such loan commitment and serves written notice to Seller within the time specified, this Contract shall be null and void."

So, if the low appraisal causes your lender to not issue the loan, and you notify them within the contingency period, then you should be able to walk away with no penalties and your 5% back.

But you should consult your RE attorney, agent and the contract.
1 vote Thank Flag Link Mon Jun 16, 2008
Alan May, Real Estate Pro in Evanston, IL
MVP'08
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this is a legal question that depends on the terms of your contract and, as scott mentions, whether or not there are any contingencies that are still "open"

your lawyer knows your contract and your circumstances better than anyone else. ask him/her !
0 votes Thank Flag Link Mon Jun 16, 2008
Hi Bill,

Possibly. The attorney that I use for all of my closings always puts in their initial letter to the seller's attorney that the home must appraise for at least the purchase price, thus protecting my client's for situations like this. Otherwise, if all contingencies have been met, you risk losing your earnest money.
0 votes Thank Flag Link Mon Jun 16, 2008
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