I had a deal going i forgot to submit contingency removal, buyer did pest report & did not like & canceled now seller wants 2 keep $5kdeposit

Asked by Yadira, Merced, CA Thu Oct 20, 2011

wat 2do? the buyers was way past their 17 days inspection period and had the pest inspection almost at closing and found there was issues with the home so i sent cancellation, but i forgot to remove contingency i requested the executed cancellation but seller rejected since our contingencies had expired, now they dont want to return our earnest money deposit, what do i do or what can i do?

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Shanna Rogers’ answer
Shanna Rogers, Agent, Murrieta, CA
Thu Oct 20, 2011
Hi Yadira,

In CA, all contingencies must be removed in writing - they are not passive. Refer to Steve's response below - very well put.

Shanna Rogers
SR Realty
1 vote
Todd Schneid…, Agent, Northridge, CA
Thu Oct 20, 2011
I agree with Isom. If you did not release the contingency, and they didn't ask you to with a notice to perform you definitely have a right to your deposit. Did you request an extension of time for this contingency? That is the only problem I see from the Buyers side of this deal. In the end you never released the contingency, and the sellers never officially asked you to. I would definitely get a hold of a Real Estate Attorney for some advice as well. Have an attorney look over your documents, and advise you from that point.
1 vote
Steven Ornel…, Agent, Fremont, CA
Thu Oct 20, 2011

If applicable, talk with your Broker about the situation before moving forward. If you are a Broker, and a Realtor®, talk to CAR legal. The truth of the matter is that you may be leaving out specifics that are pertinent to the situation.

My $0.02:

Assuming you used the most recent CAR Residential Purchase Agreement (4/10), here are a few points to consider:

1) If the Buyer is in default, then Seller can cancel the contract and claim the Buyer’s deposit per Para 16 -Liquidated Damages; HOWEVER, all buyer contingencies must be removed in order to do so. The contingencies in the CAR RPA are NOT "passive", meaning the Buyer must remove them in writing. Going past the contingency due date does not remove the contingency.

2) Para 14C(1) of the RPA states, "If, within time specified in this Agreement, Buyer does not, in writing, Deliver to Seller a removal of the applicable contingency or cancellation of this Agreement then Seller, after first Delivering to Buyer a Notice to Buyer to Perform (C.A.R. Form NBP) may cancel this Agreement. In such event, Seller shall authorize return of Buyer's deposit."

3) Para 14F of the RPA states, "If Buyer or Seller gives written notice of cancellation ….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 §1057.3)." The Seller must release the deposit within 30 days per Civil Code §1057.3 http://law.onecle.com/california/civil/1057.3.html

- Steve
1 vote
Anna M Brocco, Agent, Williston Park, NY
Thu Oct 20, 2011
If you are an agent, consult with your broker owner, and or, office manager.....
1 vote
Isom Coleman, Agent, Sacramento, CA
Thu Oct 20, 2011
If you are using a California Residential Purchase Contract. I would review section 14 B Section 1-4. The questions are did you send a removal of contingencies? If not and they did not request it by using a Notice to perform you may have a valid right to your deposit. If you did remove contingencies you may be in a fight for the money. Most sellers/Agents do not want to deal with the hassle of fighting for the deposit. They are not entitled to the deposit unless you put that on the cancellation. Sounds like you may have to fight for it. If you are a member of the California Association of Realtors I would recommend calling the Legal Department, I attached for you.
Good luck!
0 votes
Charlene Wes…, Agent, Valrico, FL
Thu Oct 20, 2011
I'm not sure about CA laws Yadira, but if you are an agent (your profile says other/just looking) and you represented the buyers, unfortunately, they fell outside of the inspection period so far that it appears, again, subject to CA RE Laws, that they are out of luck and would be in breach of contract allowing the sellers to retain the earnest money.

Only other thing I can think of is to see if what showed up on the PEST Report was somehow not disclosed properly on Sellers disclosures...perhaps you will have a leg to stand on there....

Best of luck to you.

Charlene Weston
Tampa, FL
0 votes
Yadira, , Merced, CA
Thu Oct 20, 2011
yes i am representing the buyer
0 votes
Isom Coleman, Agent, Sacramento, CA
Thu Oct 20, 2011
Are you representing the buyer?
0 votes
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