Home Buying in Los Angeles>Question Details

Marianne, Home Buyer in Los Angeles, CA

If Seller refuses Extension to Closing Date, and all my Contingencies have expired, do I lose my Escrow Deposit?

Asked by Marianne, Los Angeles, CA Wed May 11, 2011

I've asked my Seller for an Extension of two weeks to await the funding for my Secondary Loan. My Primary Loan has been Approved, and the Secondary Loan (a govt loan program) is just rubber stamping -- but the office is backed up with piles of applications and is running weeks behind.

The Seller -- who is also the Agent -- wants me to pay a $5K (!!) extortion fee to agree to the Extension.

Not only do I not have a spare $5K, but I refuse on principle. This is a flip for him, and he's already making $50K in less than 90 days.

Alas, all my Contingency periods have expired.

If the Seller refuses to sign an Extension Agreement, do I lose my $10K Escrow Deposit, or do I get it back?

How do I get my $10K back?

How do I make him proceed with this Sale without giving him this extortion $ ?

What role does Escrow company play in this? (Naturally, the Escrow company is owned by Seller's agency. Sigh.)

What does "going to court" involve? How long would that take?

Please advise!

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Answers

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BEST ANSWER
Dear Marianne:

First, take a deep breath and don't panic. Assuming the worst - that the Seller won't give you an extension and wants to keep your deposit - those funds don't automatically flow to the Seller. Both parties must agree to and sign cancellation instructions; otherwise, this is a dispute that is resolved first by invoking the mediation clause in the purchase contract (your offer was written on a CAR RPA contract form, right?) and then, if both of you agreed to it, moving forward with arbitration, if both you and seller agreed to this clause in the agreement. That presumes that mediation was unsuccessful. The mediation process can take anywhere from 4-8 weeks. Arbitration can take 4-6 months. A lawsuit could take a year or more to resolve. Each party must pay their own fees, including attorney representation, during this dispute process. Under the CAR contract, the prevailing party is entitled to reimbursement of their legal fees, if any, by the losing party.

Since the seller is also an agent, it almost sounds like he is either posturing or is in a tight cash situation.

If that is so, then now's the time for your agent to get proactive and creative. How about a 2-week extension with no penalty, but if the deal does not close in 2 weeks, then a $100 per day penalty charge applies? How about spreading that risk to the lender, i.e., if the lender can't get the loan to close within the next two weeks then the lender is liable for the $100 per day penalty charge? Or, if you feel 100% confident that your 2nd loan will be approved, why not agree to release a couple thousand dollars of your deposit to the seller to show good faith of closing? (You will lose that $2,000 if the deal does not close.) Remember, everything is negotiable if you stay calm and offer alternatives, unless the seller has just decided he does not want to sell to you, but that does not sound like the case here.

Finally, if your second 'government' loan is an FHA 203K loan, I highly doubt that it can close within the next two weeks. I've seen these deals often take 4-6 months to close.

Good Luck.

Meredith McKenzie
Associate Broker
Keller Williams Realty
1660 Hillhurst Avenue
Los Angeles, CA 90027
323-300-1110
meredithmckenzie@kw.com
1 vote Thank Flag Link Wed May 11, 2011
Hi Marianne;
I am here in Los Angeles, CA, so I'll talk from the standpoint of the contract you are probably using.
The relevant portions of the contract to your question are Close of Escrow (pp1D), Time Periods, Removal of Contingencies, Cancellation Rights (pp 14), Joint Instructions to Escrow Holder (pp 24), Mediation, Arbitration, and Liquidated Damages (pp 25 and 26), and Time is of the Essence, (pp 28).
First, I'm not an attorney; this response is from anecdotal knowledge and experience. Read the aforementioned paragraphs in your contract carefully.
Next, speak with your escrow company. Find out what their policy is when an escrow cannot close on time. Most escrow companies will tell you that they continue to proceed "as if", (as if the escrow is going to close and that all parties want the escrow).
Next, did you sign any addendum, amendment, etc. agreeing to a per diem or late penalty if you did not close on time? If not, then you simply do not have to agree to one now, nor can it be imposed on you. If the seller wanted one, he/ she, as an agent, should have known to include it during contract negotiations. It is simply too late now.
If the seller/ agent threatens to cancel, there are a few things you should know. The escrow cannot be cancelled without mutual agreement of the parties. What this means is that the seller would have to request cancellation, and you would have to agree, and sign cancellation agreements through escrow. In order to make that concession, the Seller will have to return your deposit.
The mechanism is describe in paragraph 14C, and essentially works like this: The seller must first give you notice to remove your loan contingency (or to close the escrow). If you do not, the seller has the right to request cancellation. He must return your deposit. It is in the contract you both signed.
To be clear, unless you default on the contract (you walk away without the protection of one of your contingencies) your $10,000 is not in jeopardy. Getting the property, however, may be. Does the seller have a backup offer? Is it for more money? What is their motivation for waiting another 2 weeks for you?
From the outside, this simply seems like a bit of seller extortion. It is common practice, in REO properties, for the bank to request a hefty per diem if the escrow does not close on time. As a rule, if the buyer is using "good faith efforts" to close the escrow, it is not enforced. A prudent seller sees the big picture (to close the escrow); it is simply not in their best interest to cancel and start over (we all know about the bird in the hand!).
Your agent needs to read the contract, step up and play hardball for you. This is why we get paid- to negotiate for our client's best interests.
Deborah Bremner
The Bremner Group at Coldwell Banker
REALTOR, 00588885, ABR, CDPE, eAgent, CSP, SFR, HRC, CRE
(O) 310-571-1364 DIRECT
(D) 818.564.6591
(C) 310-422-4288
http://www.thebremnergroup.com
Accredited Buyer Representative|Certified Distressed Property Expert |Pre-Foreclosure Specialist Certified
I want you to know that I appreciate any referrals from friends and associates who may be in the market to buy or sell real estate. You can count on me giving them the same high-quality service I provide to all of my clients.
3 votes Thank Flag Link Wed May 11, 2011
Dear Marianne

I handle deposit disputes very regularly as an attorney. My view is that before if the deposit amount is less than $25,000, it is probably not a good idea to think about "going to court." This is the kind of case where mediation is more helpful - Believe me, you don't want to put yourself through the ordeal of litigation over $25,000. Try to compromise.

But first you need to know where you stand on the dispute.

Assuming you'd signed a standard CAR purchase contract for a residential property, generally speaking, unless you've removed the contingencies, you had it all the way through close of escrow. If you can't close the escrow because you couldn't get your loan approved - and you've NEVER removed loan contingency, I think your deposit is still safe.

Escrow doesn't and shouldn't get involved in deposit dispute.

I've written a few blogs on deposit disputes on my blog site. Go to the link below in case you're interested in reading them.
3 votes Thank Flag Link Wed May 11, 2011
Thanks for this reply. Very helpful.
So i received a Cancellation of Contract and in Section 2. Release of Deposit nothing has been checked off. Which states, "Unless otherwise specified above, Buyer and Seller (i) mutually release each other from all obligation to buy, sell, or exchange the Property under the Agreement, and from all claims, actions, and demands that each may have against the other(s) by reason of the Agreement; and (ii) intend that all rights and obligations arising out of the Agreement are null and void.
Does this release the deposit back to buyer (me)? And do you know how long it takes for escrow to release?
Thanks,
Buyer in same Per Diem Situation.
Flag Wed Feb 12, 2014
wow..this is a cool answer from a professional who knows!
Thanks for the input.
Flag Thu May 16, 2013
Dear Marianne

When I gave you the first answer, I only read your initial question and didn't see your response stating that the contingency has been removed. If you've signed the removal of contingencies and forwarded it to the seller, it doesn't matter if the seller has signed it. Yeah, you've removed it. Legally that means you've waived your loan contingency and if you don't close escrow on time, the seller is entitled to keep the deposit. You're obligated to sign joint escrow instruction to release it to the seller. It is never a good idea to remove the loan contingency until you've secured the loans.

I know many escrow companies won't open up a new escrow with this one remaining uncancelled. But he can always go to another escrow company and do it there. There's nothing illegal about doing that.

However, my experience has been that many sellers are willing to compromise with you on the release of the deposit so they can have part of the deposit released to them because they need the buyers' signatures to get to the money or else they have to "go to court". But for a small sum like this, some people will just to go to small claims court and bypass the mediation and arbitration requirement. They can sue up to $7500 and of course you get the remaining $2500 if you lose. Based on what you've just said and if there's no other defenses, you will most likely lose.
2 votes Thank Flag Link Thu May 12, 2011
You are all SO GENEROUS with your insights and time and advice!!!!

What a wonderful resource you are!!

I really can't thank you all enough for all your thoughtful replies and your concerns.

I wish for all you wonderful RE agents a zillion million-dollar sales this year!!

xoxoxoxo Marianne
2 votes Thank Flag Link Wed May 11, 2011
First, the seller performed according to the terms of the agreement, and reasonably expects for you to perform according to the terms that both parties agreed to accept. Yet, you're trying to change the terms of the agreement at the last moment, and that change will translate into additional costs (more holding costs and opportunity loss) for the seller. Although you feel that the seller would be "extorting" that $5K out of you, you've turned a blind eye to the money that you'd be "extorting" out of him/her.

Second, you shared that you waved all of your contingencies in writing, and Kenny already pointed out that you don't have much of a leg to stand on. Personally, I found the seller's request to be quite reasonable: all s/he is asking you to do is to release a portion of the EMD to show that you're still earnest. That implies the seller still wants to work with you. Keep in mind that you're the one who's not living up to the exact terms of your agreement, so you should be the one who needs to demonstrate to the other party that you're still earnest.

Third, talk is cheap. Many sellers have gotten (and still are getting) burned by buyers who's financing blew up--for whatever reasons--at the last moment. I realize that this delay isn't not your fault, but it's also not the seller's fault. How would you feel if the seller all of a sudden couldn't close until a date that's a week or 2 after your loan commitment deadline (due to some title issues discovered at the last moment)? Would you eagerly/gladly pay your lender a fee to extend that deadline without wanting to pass that cost along to the seller?
1 vote Thank Flag Link Thu May 12, 2011
Did you ever think the reason for the Loan companies to get leary of loans and what happens between buyer and seller is the reason loans fall through! I am the midst of one similar and the VA just today said because the seller is asking for an immediate release of funds under damage liquidation is why they now want me to reconsider working with this Broker/Seller.. The VA said not only are they paying more attention to these types of problems but so are the lenders... The latest tonight is now the lender is worried that the seller is Lying and playing games in other areas we have just not found yet and they are second guessing as to release of funds.
Flag Mon Mar 31, 2014
@Angie - bullies don't just exist on playgrounds! They get older (notice I did not say grow up!) and are an issue to contend with in many places including Real Estate. Truly, your situation is a great example of why having a qualified agent at your side is key. Obviously the seller was playing games and your client should have been relieved that you were able to get the whole deposit back.

I avoid bully agents, sellers, and buyers as much as possible because they just aren't fun with which to do business. And interestingly enough, in these declining markets, bully agents actually hurt their clients because they can't support their inflated promises to their sellers as prices drop.
1 vote Thank Flag Link Thu May 12, 2011
@Angie - that is great that she got it back, and it makes the point that the buyer and seller have both sign off. They might reluctantly sign off, but nevertheless, they need to both cancel. Somehow that happened in your situation - which is good. It would seem like the seller in your situation had a change in their direction because we all know from experience that a bonafide seller isn't bailing because a buyer is 3 days late to close unless something else is up. Maybe a better offer showed up during escrow or something - I try to never underestimate what goes on behind the scenes in the world of real estate.
1 vote Thank Flag Link Thu May 12, 2011
Here are a couple of facts.
#1 Both parties need to agree in order to cancel escrow...So until you both agree to cancel, you have a deal
#2 You are out of contract...So the seller can attempt to cancel, ask for more money, etc.

My advice for your agent is to tell him that the seller will have to wait or cancel.

Your deposit is at risk only when you release the funds. Maybe, if you release $5,000 the seller may agree to an extension but you are then running the risk of not getting the loan.

Sometimes the gov't programs run out of money, it has happened to my clients, and no one is to blame.

This is the sad ugly truth about real estate that no one likes to talk about. The banks screw up, and the buyer and seller has to suffer without any accountability from the bank.

Personally, I think the seller is bluffing as they knew they were taking a loan with a gov't program and those loans have a lot of issues and are lengthy.

Good luck...and P.S. next time, refer one of your friends to us, we know how to deal with these sharks.
1 vote Thank Flag Link Thu May 12, 2011
Hi Marianne:

You speak about your contingency period being expired...and your 2nd loan has not been approved yet. Thus, you have not removed your loan contingency within the contract period...and the Seller has not granted you an extension.

In fact, he is asking for an additional $5,000 to do the extension as a "good faith" deposit. This would be applied to your down payment. Any deposit may not be deemed "non-refundable".

However,

In the CAR Purchase Agreement, did you initial the Liquidated Damages Clause (item #25)?

It reads as follows:

"25.LIQUIDATED DAMAGES:
If Buyer fails to complete this purchase because of Buyer's default, Seller shall retain, as liquidated damages, the deposit actually paid. If the Property is a dwelling with no more than four units, one of which Buyer intends to occupy, then the amount retained shall be no more than 3% of the purchase price. Any excess shall be returned to Buyer. Release of funds will require mutual, Signed release instructions from both Buyer and Seller, judicial decision or arbitration award. AT TIME OF THE INCREASED DEPOSIT BUYER AND SELLER SHALL SIGN A SEPARATE LIQUIDATED DAMAGES PROVISION FOR ANY INCREASED DEPOSIT. (C.A.R. FORM RID)."

If you the Buyer default, by not removing your contingencies, and the Seller issues you a "Buyers Notice to Perform", he may attempt to force the cancellation of this escrow, you BOTH would need to sign off on it. If you do not sign the cancellation instructions, the money stays in escrow until a resolution occurs, either in court, with a mediation, or between Buyer and Seller. The Seller will not be able to market or sell the property until you BOTH release the escrow.

Go back and read your contract. You have some power here too. How long will it be until your 2nd loan is approved?

And...get the advice from a Real Estate Attorney. You may also speak with the Broker for the company that the Seller works for, that is if he is not the owner. Sometimes, a conversation with the Broker for the company may help resolve issues like this.

Good luck!

All the best,

Kat Becker
Prudential California Realty
katbecker@prula.com
1 vote Thank Flag Link Thu May 12, 2011
@Angie - the seller cannot unilaterally cancel escrow...and technically can't sell to someone else without the buyer's signature to cancel the escrow. They just can't cancel and give the deposit back either without consent from the buyer. So if the buyer wants the place and can perform - they can hold the seller to the terms of the sale.

@Tara - it looks like she signed the CR but hasn't gotten it back with the seller's signature....While the question was asked of Kenny, my believe is that for all intents and purposes, the contingencies are removed - but I defer to counsel.
1 vote Thank Flag Link Wed May 11, 2011
Hi Marianne,

I agree with Meredith below in that the seller may be bluffing and one would think that in two weeks your loan is approved he will want to move forward with the sale rather than tie it up in proceeds towards arbitration. Also, did you remove your contingencies in writing? If you used a California Association of Realtors Purchase Agreement then contingencies are removed in writing not simply at the end of the agreed to time periods. So if you haven't removed contingencies in writing you are absolutely entitled to the return of your full deposit.

Honestly, in this market it is not at all uncommon for closings to take much longer than expected. And the seller, being that he is an agent/broker, should absolutely know this! What a pill.

I hope that helps!
Best,
Tara

Tara Steinke
Broker, Residential Sales
Solant Real Estate Advisors
619-384-6014
1 vote Thank Flag Link Wed May 11, 2011
Marianne,

There is some good information offered here. With regard to your deposit, even though you have removed contingencies it does not mean you automatically lose it. It states in the California Residential Purchase Agreement that if after giving you a notice to perform, the seller cancels the transaction then they must return your deposit to you. It could get tricky if they won't sign to release it and you have to go to arbitration, but I don't think the decision would go their way.

Like Meredith said, "If you love it, fight for it"!

Good luck,
Angie Simpson
Coldwell Banker
Web Reference: http://www.angiesimpson.com
1 vote Thank Flag Link Wed May 11, 2011
Marianne:

It's important to note that neither mediation nor any other type of dispute resolution (arbitration/litigation) begins until AFTER the contract has been cancelled by one or both parties and there is a dispute as to the disposal of the earnest money in escrow. While the seller is not 'losing' the $10,000 you have tied up in escrow during mediation/arbitration, he is losing the opportunity to be on the market finding another buyer. He also will have to bear the initial costs of his share of the mediator fee and any attorney representation.

Thanks for letting me know that the second is the City of LA First Time Homebuyer program. It's a great program but the City is understaffed in that department right now which could delay things out beyond two weeks. Your agent really needs to work with your lender to exert some pressure to get this loan handled quickly. Since you live within the City, it wouldn't hurt for you to call your City Councilmember's office and seek their assistance in expediting the paperwork. Ask to speak with the field deputy for your neighborhood area and get both their cell phone number and email address. Make certain that you emphasize you are their constituent, this is an affordable housing issue, and there is urgency to your request.

The most important issue for you to focus on at this time is: Do you love and want the house? If so, then fight for it.

Best,

Meredith McKenzie
Keller Williams Realty
323-300-1110
meredithmckenzie@kw.com
1 vote Thank Flag Link Wed May 11, 2011
Deborah and Kenny chimed in while I was answering and so I didn't get to see their responses - they are solid too.

Focus on getting it closed...and/or hire Deborah to take the seller to the mat!
1 vote Thank Flag Link Wed May 11, 2011
PS:
Yes, $5000 is outrageous. That's $700 per day. RIDICULOUS! Don't do it. Your loan will be closed before this seller can effect all this nonsense. See my answer below.
Deborah Bremner
The Bremner Group at Coldwell Banker
REALTOR, 00588885, ABR, CDPE, eAgent, CSP, SFR, HRC, CRE
(O) 310-571-1364 DIRECT
(D) 818.564.6591
(C) 310-422-4288
http://www.thebremnergroup.com
Accredited Buyer Representative|Certified Distressed Property Expert |Pre-Foreclosure Specialist Certified
I want you to know that I appreciate any referrals from friends and associates who may be in the market to buy or sell real estate. You can count on me giving them the same high-quality service I provide to all of my clients.
1 vote Thank Flag Link Wed May 11, 2011
First, Meredith provided some sound advice. Second, there is no longer any such thing as rubber stamping loans - so while you may have confidence in your ability to close, the seller is not likely of the same opinion. And that is my point - no seller likes to be in this position of waiting "two more weeks" for that to become another "two more weeks" when your loan still isn't approved. As a seller, you are in a tough spot of trying to see clarity in the buyers true ability to close and not lose time in the process.

Due to what Meredith explained, the seller really has no leverage here unless you are unable to close. I would focus your efforts on staying on top of your lender daily to push on the loan, and expect your agent to work to hold the deal together until you can get the loans funded. Having your agent stay in daily contact with the seller can help too. You are in a place where a lot of games get played, which is why the seller is pushing you.

When sellers across the table start complaining like this, many times I just drift off to Charlie Brown's classroom and all I hear is blah, blah, blah, blah, blah, blah.... Let them vent and then tell them when we are closing. Really, the extension may not even be necessary - I have had escrows in which we went beyond the closing date and closed without the formal extension. Of course, once again, you need to be sure you can close. Maybe the seller should look at accepting backup offers.

It is somewhat amusing and concerning that you come to this forum with your questions....because it makes me wonder what your agent is saying and doing on your behalf to deal with this situation. What advice has (s)he given you? And did you sign the Contingency Removal?

BeachBrokerBill
DRE#01775528
1 vote Thank Flag Link Wed May 11, 2011
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0 votes Thank Flag Link Sat Dec 20, 2014
WHY ON EARTH WOULD YOU NOT HAVE YOUR OWN AGENT?? This is a lesson to everyone who thinks its best to "just call the listing agent" to sell me the house....
0 votes Thank Flag Link Mon Dec 1, 2014
Oh geez, is it Barron props or shark investments? Just went through something very similar.

yes you'll lose your money -I don't care what they tell you, especially when they own the escrow co, are you waiting on chdap?

get yourself to any attorney quick because its an easy payday for him to take your money and do the same to the next in line and I'm sure he has back up offers.
I can't think of anything off the top of my head, not even a notice to perform but in the meantime tell them youre going to slap a lis pendens on the house (it'll cloud title and he wont be able to sell until its resolved) and if they insist on the 5k you are going to immediately file criminal charges for extortion, blackmail (pick one) youre gonna have to come off like a real hard nose jerk but you have a lot to lose and unfortunately and that's the only way to play ball with these types. I have a feeling who they are, there a few different names, please email me escrow or listing agency as we are putting together a fraud case right now.

when's escrow supposed to close?
0 votes Thank Flag Link Sun Aug 3, 2014
I'd seek the advice of a real estate attorney pronto!
0 votes Thank Flag Link Tue Jul 22, 2014
I am a licensed real estate broker in Alabama. I know laws can be different from state to state but the principle is still the same. In my opinion there is no reason why you would not get your 10k back. That money is put down to show your are serious and is refundable unless you back out of the deal for no reason. Being that the circumstances are not your fault and the seller will be canceling the contract you should get your earnest money back.
0 votes Thank Flag Link Wed May 15, 2013
Marianne: You did the right thing. It is definitely better to compromise, and $2000 is a whole lot less than legal fees and waste of time. It sounds like you really want this house, and the seller certainly wants to close and make a profit.

DAVID COOPER. Foreclosure and Bank Owned REO Buyer's Agent at Vertical Realty-Las Vegas. For your freee list Call +1-7024997037 or check website
0 votes Thank Flag Link Fri Jun 3, 2011
Not knowing all the facts, but with what you told us. I would get Real Estate Attorney involved ASAP. Don't waste any more time, get representation really fast.
0 votes Thank Flag Link Fri Jun 3, 2011
No, gang, haven't closed...

I gave the Seller a $100 per diem that's gonna cost me $2K. Plus waived the Home Warranty, will pay full month's HOA and Taxes...

Closing Date is June 15. If we blow this, I'm really up the creek..

Thanks SO much for all your wonderful advice!!

xoxoxoxo
0 votes Thank Flag Link Wed Jun 1, 2011
Hey Marianne:

So did you close yet?
0 votes Thank Flag Link Wed Jun 1, 2011
I am 100% certain there is an arbitration clause in your purchase agreement, and hiring an attorney before you go to arbitration is a waste of money. If you go to arbitration, based on my experience, you will lose. Plus, you really don't know if a 2 week extension is really all the time you need.

David Cooper. Las Vegas Foreclosure Investor and Buyer's Agent in Bank Owned REOs with Huge Cash Flow. For FREE daily list email: davidcooper@lasvegaswinner.org CALL +1-7024997037
0 votes Thank Flag Link Tue May 17, 2011
If all of your contingencies have expired and you fail to close, you may well lose your escrow deposit. The seller is not obligated to agree to extend the closing date. You stated that the agent is a Realtor, are you one as well? You should have an attorney to represent you and need to involve him/her in order to protect your escrow.
0 votes Thank Flag Link Tue May 17, 2011
O my Marianne,

I really am not sure with the depth of your situation what to say but I would say QUICK... talk with an Attorney.

Second... hire a Realtor next time around.

Third... Find out what the seller reasons are for the $5k... he might be getting charged dailey interest, hard money costs, be loosing on another deal if you do not close, etc.

The last things you want is court costs, attorney fees, etc. Even if it is loosing battle for you he will also loose. You both need to talk this one out.

All I can say... best of luck.
0 votes Thank Flag Link Mon May 16, 2011
Best if you talked to a real estate attorney for advise on such matters. From a realtors perspective, if all your contingencies period have expired then it would be best if you try to work out an amicable resolution.
Web Reference: http://www.DavidNewHome.com
0 votes Thank Flag Link Mon May 16, 2011
Hi Marianne-

I'm not a lawyer, so this is just personal experience and anecdotal. If both sides have unlimited funds to hire attorneys and what you are saying is that you actively signed a removal of all contingencies, the reality is that you will probably lose.

Logistically, it probably makes most sense to everyone to just come to a mutual split where you work things out before litigation to avoid what could be very high legal costs with no guarantee of an outcome that would work out in your favor.

Again, the fact you removed contingencies really makes it a tough case for you, and the seller has a lot more leverage on you than you have on him.

Jerry
0 votes Thank Flag Link Sat May 14, 2011
Whenever purchasing properties at most foreclosure auctions, buyers usually have to pay all cash, and that a portion of cash often is some form of private or hard money. Some hard money lenders will charge as much as 18% interest and up to 10 points. Assuming that seller purchased that property for $240K (on 2011-1-31), spent roughly $15K on the repairs, and borrowed private money at 16% interest and 6 points (which is fairly common), then s/he would have lost $9K and some change with the additional $5K.

In light of the additional facts, that seller is being quite generous. (Plus, s/he paid too much for that property.)
0 votes Thank Flag Link Fri May 13, 2011
Hi again Marianne:

Thanks for providing additional facts for your situation.

Here's my question: Is the seller/agent a licensed broker who works for himself or is he a sales agent who works for a real estate company that has an office manager?

BTW - the escrow period language is vague and subject to interpretation. The escrow company does not get involved nor advise in any disputes. They merely hold the funds until given final, mutually agreed upon written directions from the buyer and seller as to disbursement in the event the deal does not close and there is a dispute over who gets to keep the earnest money deposit.

Meredith McKenzie
Associate Broker
Keller Williams Realty
323-300-1110
meredithmckenzie@kw.com
0 votes Thank Flag Link Thu May 12, 2011
Thank you DP2. Your explanation from the sellers viewpoint balances the frustration that Marianne is feeling. No one is really at fault here, it's just business. So many buyers get emotional in the house buying process, that they lose sight of the legal binding agreement they signed that they agreed to perform "on time" Every business has late charges and finance fees when you are late, that is all that is happening here

David Cooper..Las Vegas Foreclosure Investor in Bank Owned REOs with Cash Flow. FREE daily list.. email davidcooper@lasvegaswinner.org or call +1-7024997037... not a real estate agent
0 votes Thank Flag Link Thu May 12, 2011
Hi --

The Seller (who is also the Seller/Agent) asked for AN ADDITIONAL $5K above the Sales Price for the 2 week extension!!

He told my RE agent it's to cover his expenses -- which is ludicrous. HOA fees are $325/mo, and he bought unit with cash at a REO auction. Unless he borrowed the $$ from the mob to buy the apt, I can't imagine his principle & interest on the $$ is $5k -- do you?

He paid $240K end of Jan, threw down a carpet, slapped on some paint, and sold it to me at $305K. A pretty neat profit. You'd think he'd be happy with his investment return, even if he does wait an extra two weeks to pocket his profit.

Seller knew I was obtaining a silent second loan from City of LA. It's mentioned all over my contract.

Also -- I did not mention this in my original post because I didn't want to confuse matters -- but our Counter Offer Two includes the following entry: "Escrow Period to be 50 days from Final Acceptance, with Seller understanding that Closing could take 60 days due to CIty of Los Angeles LIPA program."

Seller signed the Counter Two with this term, but now says that it's "ambiguous." Am I crazy? What is ambiguous?

SO, in Summary dear folks:

-- 50 days is Tues, May 17
-- 60 days is Fri, May 27

IF I manage to beg my Lender and City of LA to fund BY May 27, do you see any legal reason the Seller can object?

What role does the Escrow company play in all this? Does Escrow Company care what it says in Counter Offer Two? Does Escrow play the role of interpreter? If Escrow receives all the $$ and paperwork within the 60 days, does Escrow proceed with Closing? What if the Seller objects?

I do love the apt and don't want to lose it. I don't want to start the house hunt again. And I don't want to lose my $10K Escrow deposit.... But, on principle, I am not going to pay for $5K for an extension, certainly not before the 60 days comes and goes, and after that, only what is common practice. (I believe banks charge $50 to $100 per diem for every day past original closing date. Is that your experience?)

I am an educated woman, but I'm also a low-income homebuyer who lives out of town and can't afford an attorney. Your advice -- and support -- is priceless to me. I'm overwhelmed by the outpouring of advice.

Now that I've added a few more specifics, I'd appreciate any additional insights you can provide.

Thanks SO very much!!

x
0 votes Thank Flag Link Thu May 12, 2011
Get an attorney as this will be a line for line reading of the contract, but if financing is the reason for not making closing then the contract does become void and since financing is a contingency to completion of contract you would not lose your deposit because you could not get it. $300 for an attorney to save $10,000 is well worth it don't you think, The Realtor/Seller is out of line asking for more escrow and they know it. Your attorney should put them in their place, do not wait, get an attorney. You may want to mention this the local Association of Realtors and also take action on the Realtor about this issue.
0 votes Thank Flag Link Thu May 12, 2011
Hi, Marianne,
I am still unclear as to a couple of points. Are you represented by your own agent, or is the seller/listing agent acting as a dual agent? And did the seller ask for an additional $5000, or for you to release $5000 of your good faith deposit already held by escrow?
0 votes Thank Flag Link Thu May 12, 2011
@Beachbroker - While it was not unilateral cancellation, as we know that is not possible, it was cancellation under duress/intimidation and it amounted to a unilateral decision. We never did find out what the motivation was.
0 votes Thank Flag Link Thu May 12, 2011
Does your buyer lose the secondary funding from the government that delayed this transaction? Can they move their prequlaifications to make another offer on another house


David Cooper..Las Vegas Foreclosure Investor in Bank Owned REOs with Cash Flow. FREE daily list.. email davidcooper@lasvegaswinner.org or call +1-7024997037... not a real estate agent
0 votes Thank Flag Link Thu May 12, 2011
@Beachbroker - Yes, thankfully she did get it back. It was pretty stressful for awhile.

Angie Simpson
Coldwell Banker
0 votes Thank Flag Link Thu May 12, 2011
@Angie - So did your buyer get their deposit back?
0 votes Thank Flag Link Thu May 12, 2011
Looking from the sellers side, you really have no idea if 2 weeks is long enough to get your secondary funding.
It could 2 months. How long is the seller suppossed to wait after all the legal requirements have been met. I have had contracts usually have a specific daily penality just for delays just like this. I don't think the seller is out of line asking for some form of compensation.
If you go to court and he can prove that he was harmed by this delay is costing him money, you will lose your $10,000.

David Cooper Las Vegas Foreclosure Investor in Bank Owned REOs with Huge Cash Flow. Free Daily List
email or call +1-7024997037 not a real estate agent
0 votes Thank Flag Link Thu May 12, 2011
@Beachbroker - By the way, all we needed was 3 more days for full loan approval, not even two weeks.

Angie Simpson
Coldwell Banker
0 votes Thank Flag Link Thu May 12, 2011
@Beachbroker - You wouldn't think that the seller could unilaterally cancel the escrow (at least they aren't supposed to be able to under the circumstances). However, I had the very same situation happen in which I represented the buyer and contingencies had been removed. The seller would not grant us an extension on our loan contingency either. The listing agent just stopped calling us back (her broker would not return calls or emails either) and the buyer sent a cancellation notice to escrow so they stopped moving forward. Escrow would not release my buyer's deposit because mutual instructions to do so had not been signed. My buyer considered suing for specific performance but was so panicked about not getting her deposit back that in the end that was all she wanted. Not everybody plays by the rules.

Angie Simpson
Coldwell Banker
0 votes Thank Flag Link Thu May 12, 2011
Sounds like you didn't use a realtor and that was not the best choice. Realtors are most valuable during escrow for situations like this. You call the extension fee extortion money but that is not accurate. This seller is incurring costs during this period plus they are reasonably thinking that because you didn't close on time there is a risk you will never close. Work out a reasonable amount with the Seller and get on the Lender.
Web Reference: http://www.janeybishop.com
0 votes Thank Flag Link Thu May 12, 2011
Kenny rocks! He always has great answers. So for me, it comes down to - pushing your agent and lender to get this closed - because then the seller is still relatively "whole." It is important to remember that in most cases, the seller still wants to sell...so staying with you, assuming you can close, is usually their best option as opposed to starting the process all over again with another buyer and due diligence period. They maybe agitated with you, and that is ok, as long as you get the deal done. I have had similar situations in which the escrow closed 6 weeks late. I as the agent just had to tap dance through the angry fits on the seller side. The reality is that they had no other options.

Why did your agent have you remove all contingencies without having this loan further down the approval road? There is a lesson to be learned here..... And if this one falls apart, it maybe time to get a new agent....
0 votes Thank Flag Link Thu May 12, 2011
Kenny, What if i HAVE signed my away all my contingencies?

BUT, the Seller for some reason has not yet signed that document (lifting the contingencies).

If he hasn't signed it BEFORE I ask him in writing for an Extension, does it make a difference?

(hope you're able to follow that...)
0 votes Thank Flag Link Wed May 11, 2011
Hi Meredith -- It's a City of LA First TIme Homebuyer's Loan. They said they need another week with it, then time to fund it. We were told 2 weeks, at most.

My Closing Date, however, is set for early next week.

The Seller loses nothing with Mediation, does he? Meanwhile my $10K is held hostage -- and I would need that $$ to buy another home.

Am I crazy, or isn't $5K an outrageous "fee" for a 2-wk extension? What is common practice?

Thanks so much everyone!!
0 votes Thank Flag Link Wed May 11, 2011
I signed away all my Contingencies.

Would I go to arbitration // mediation NOW, while Contract still in effect, before the official Closing Date?
0 votes Thank Flag Link Wed May 11, 2011
Hi Marianne,

Talk with your buyer's agent and ask for help in understanding and your closing attorney on the legael ease in the contract.
In Virginia, our closing date in the contract is written on or about. Sellers can write in expiration clauses
on financing issues though.
Good Luck!!
0 votes Thank Flag Link Wed May 11, 2011
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