I do not know how your contract was written or if a Form SSA ( Short Sale Addendum ) was used.
On a short sale addendum used in the state of California on most short sale transactions to aid in how this is usually done,.... usually the buyer holds their monies until the short sale is approved. However, Listing agents are tired of BUYER BAIL and with good reason. Some buyers have 22 offers out there awaiting for a short sale to be approved somewhere. By having skin in the game circumvents this. I can understand the seller wanting a buyer who is willing to put 3% down, but everything is a negotiation. As a buyers agent I say 1% tops,... as a listing agent I say 1-3% in escrow held to show they are NOT a BUYER BAIL and willing to wait 45 days for me to get a short sale agreed upon to start the escrow time periods. If the seller has not procured a short sale contingency removal in 45 days then the funds should be asked for by the buyer and the seller should be on it to release the funds. The problem is sellers lose track of who they are and how it helps to have a buyer and think if they hold the buyers deposit it may somehow help. They are already under stress from short selling their property as it is.
Harold Sharpe - Broker
So Cal Homes Realty
California Department of Real Estate Broker License # 01312992
CJ has provided an excellent post (Thumbs Up!) from the "seller's position" and one or more of the influences contained in her post may be why your Agent is suggesting an upfront deposit. Again, ask your agent the "why" question and then determine if you believe this person is working in your best interests.
"...how long does it take to get the money back if we find something else or decide to opt out later."
Let me provide the â€œquick answerâ€ and then provide some â€œfollow-upâ€:
Para 14F of the CAR RPA states:
"If Buyer or Seller gives written notice of cancellation â€¦.A Buyer or Seller may be subject to a civil penalty of up to $1,000 for refusal to sign such instructions if no good faith dispute exists as to who is entitled to the deposited funds (Civil Code Â§1057.3)." The Seller must release the deposit within 30 days per Civil Code Â§1057.3"
( Civil Code Â§1057.3 can be found at http://law.onecle.com/california/civil/1057.3.html )
So, once you submit the cancellation notice the Seller has 30 days to sign the escrow release or be subject to the penalty.
According to my discussions with the CAR Legal hotline, when a SSA is used there are two diametrically opposed legal theories that come into play if the SSA's waiting period has not passed.
The SSA, Para 1A, provides for a â€œdate certainâ€ deadline (in days) that the Buyer can modify as far as seller providing proof of lender(s) acceptance. What is the liability of the Buyer when a cancellation occurs before and after this â€œdate certain?â€
After the â€œdate certainâ€:
Once the â€œdate certainâ€ has passed without lender(s) confirmation the Buyer may cancel without liability.
Before the â€œdate certainâ€:
There is controversy here based on Para 1 that provides a 45-day (unless modified by the Buyer) period in which to obtain lender approvals. On one hand, this seems to indicate a cancellation cannot be made until the â€œdate certainâ€ passes; however, on the other hand, if I as a Buyer find something about the property that materially affects my willingness to buy it, why should I be made to wait? There are various CA Civil Code sections, dating back to 1872, under PART 4. MAXIMS OF JURISPRUDENCE 3509-3548 that conflict with making a Buyer wait in these circumstances. (These items were specifically cited by the CAR's RE Lawyer: 3532.-The law neither does nor requires idle acts, and 3533.-The law disregards trifles.
Per the CAR Lawyer, there has been no legal case brought to the court that has provided legal precedence concerning this situation. I was told the Seller could be damaged if the buyer pulled out of the transaction before the "date certain" and then subsequently had to sell at a price that was lower than what the original buyer had offered. In any case, pulling out before the date certain seems to have the possibility of introducing exposure.
If you were to pull out of the transaction before the â€œdate certainâ€ and assuming you use the most recent CAR RPA, you would normally have a duty to use Mediation and Arbitration as a means of resolution (Para 26 â€œDispute Resolutionâ€); however, if the deposit amount is within small claims court limits, you can go directly to small claims court via Para 26C1 (also see the Liquidated Damages clause contained in Para 25).
On that note:
On July 8, 2011, Governor Jerry Brown signed Senate Bill 221 into law. SB 221 increases the Small Claims Court jurisdictional limit from $7,500 to $10,000 with two caveats. First, the jurisdictional limit of the Small Claims Court will remain $7,500 for claims of bodily injury resulting from a car accident if the defendant in the action is insured and the insuredâ€™s policy includes a duty to defend. Second, the Small Claims jurisdictional limit will remain $5,000 for suits brought by entities such as corporations, limited liability companies, partnerships and the like. Since the new legislation does not include an â€œeffective date,â€ it is assumed that SB 221 will become law on January 1, 2012.
I must say I am a listing agent that has requested on behalf of the seller 1.5% deposit upon acceptance on a short sale offer and 1.5% when bank approves. This is because, my experience tells me when buyer's are willing to write a check they are more committed to the process and are potentially less likely to keep looking at homes and cancel the minute something else sparkles around the corner.
I have also discussed the option with my buying client (and some have decided to do so) to place half now and half later when competing against other offers on short sales. Sometimes showing commitment helps get your offer accepted, particularly when previous buyer's have walked on an offer and time is running out for the seller.
I agree with the points below from well respected agents as well. I am not sure how much your deposit is earning in savings these days but the principle idea is there. I also see short sale approvals getting faster with certain lenders. The reality is every short sale is different and approval times are unpredictable in spite of many best efforts to obtain approval asap.
With that said, find out more about the short sale if you can. Who is the lender, one or two or three? Do they have BPO? Is it a portfolio loan or investor? MI or not? Have they had other offers fall out and why? Is the listing agent handling the negotiation or a third party? Is it HAFA? Is there an HOA involved? How long has seller been delinquent? Is a Trustee sale date scheduled? How much is the home short? So many things I would evaluate as the buyer's agent before I recommend a deposit in advance of lender approval.
On your question about how long does it take to get your money back; if the check has cleared the escrow company and the seller signs the release in a timely fashion, you should be able to get your money back within a week of canceling. There is no advantage to a seller facing foreclosure to sit on your deposit because they want to get a new offer into escrow asap.
In the end, it is your money and you have to decide if you need the competitive edge of depositing before approval and whether it is worth it sitting in escrow. Hopefully, your agent will help you work through all the options.
On a similar note, I am seeing more short sale agents ask for physical investigations/inspection contingencies be completed on acceptance by seller. Again, if your not ok with the physicality of the home, why should the seller and agent work hard for an approval just to see the buyer walk after 3K of termites are found. Every agent has been burned one way or another on short sales and looks for way to minimize timelines, buyers walking, and foreclosure for their sellers. Completing inspections up front can be up to $1000 which you do as a buyer do not get back if you walk. Again, the kind of risk the come with offering on a short sale.
Your agent's job is to know your goals and look our for your best interest in regards to purchasing. A short sale has its risk of time for the buyer and the inability ( many times) to negotiate repairs after a long wait. They are not all deals but some are and some are worth the wait.
Best of luck.
"We placed the property on the market because to be honest Mr. XXX we do
not think that this is going to work out . I have tried to be more than fair
but as a BROKER I know, and you guys should know that we could call the DRE
and have a complaint filed because of that deposit . You see, the client
signed the contract and you as a Broker know better than to leave the
deposit out . This is kind of ridiculous that the deposit would be held two
weeks . I also when I explained it to my client that there was no deposit
yet what do you think he said? We have a fiduciary relationship with the
clients that is in our Agency Disclosure . I am not trying to be a jerk but
from our side we have to do our job . This is not being done on your side
the escrow company can pick up a deposit check within 4 hours what's the
problem here ? If this were your client and would you allow an agent to do
this and jeopardize getting a legitimate offer ? This is just wasting time
because the bank requires a copy of the escrow receipt from the escrow
I seriously do not understand this forwarded email. What is trying to tell us about the DRE complaint and all to put the money in escrow. We had just put the bid and signed the short sale addendum. Our agent is saying Bank is requiring a copy of the escrow account receipt.
I hope that helps, feel free to contact me with any questions.
At your service,
The question that wasn't really answered is how to get the money back out of escrow. This is something that has to be agreed to by both Buyer and Seller. If one party holds it up it could take a while.
Make sure that you understand any contract that you are signing and that you allow your agent to work for you. By reaching out to us you have taken away a valuable piece of information from your agent. Let your agent know that you need more information.
All the best to you.
No, this is NOT common. Unless there's a compelling reason that you have not shared there's really no reason to let your money sit in escrow and not earning interest.
Please ask your Agent: Why?
How it normally works:
Your offer is submitted using the CAR Residential Purchase Agreement (RPA) along with the CAR Short Sale Addendum (SSA). Barring any changes via addendums, none of your contingencies (inspection, loan, and appraisal) start and your deposit is not made until you get the bank approval(s). The form provides 45 days for the Seller to obtain any loan approval(s), after which, you no longer have an obligation to proceed with the effort of buying the property if you so desire.
Remax Santa Clara Valley
Wow - that is such a strangely worded email that I am having a hard time understanding it. : /
If there was no Short Sale Addendum attached to the offer, then I can understand why the seller's agent is expecting the deposit to be placed in escrow. However, a buyer's agent will typically apply a short sale addendum to a short sale offer because it addresses this very issue about deposit and other important short sale related items that the standard offer contract does not.
The email points out that in a standard contract, in the first paragraph regarding the deposit that it must be deposited within 3 days of offer acceptance. And if it isn't a seller has a right to cancel. If the agent representing the buyer is holding the check and not depositing it according to the contract, there could be a DRE related issue because it could be construed as a mishandling of funds.
In my experience, I have never had a short sale lender request a copy of the deposit receipt or check. They want a copy of the offer contract and typically the short sale addendum. Again, hard to say without seeing all that was presented.
Either way, without seeing your complete offer package, it is hard to offer a reason why he said, she said understanding. I would suggest sitting down with your agent and possibly your agent's broker to see if you can get clear answers.