Home Buying in 94538>Question Details

John, Home Buyer in 94538

I back up within loan contingency period because of disapproval of my loan from Bank. Seller is asking for penalty. What are my rights? John CA

Asked by John, 94538 Fri Jun 25, 2010

I was in contract and my loan hasn't approved . So I back up within loan contingency period. First , seller's agent told there is no Penalty. Then after two days ,he asked for $750 inspection fees he paid . I agreed to it And now , again after two days he is asking me to pay cancellations charges. Is there certain period within seller has to take decision and sign on 'cancellation of contract' that I sent ? John CA

Help the community by answering this question:


If you have a loan contingency, then you can cancel if you are not approved for the loan.
You will still be responsible for all inspections that you have authorized, and also if contract states buyers have to pay.
Sometimes the title company may charge for an escrow cancellation, and you may have to pay for that, if their title policy so states. However, you may be able to negotiate that with them.
Seller has to respond to cancellation within a reasonable period of time, otherwise they may be responsible for damages, and your contract may stipulate that-you need to say what the contract says.
Additionally, call the broker of the other agent, and ask him to clarify, and he can also help in resolving your problem. A lot depends how the contract reads, etc.
You should be able to get your deposit back after deducting for inspections, etc, that you have ordered.
Shan Saigal
1 vote Thank Flag Link Fri Jun 25, 2010

It really depends on your contract so advice from an attorney of your choosing is the final word.

I see two problems with what you explain here. The seller has to be damaged in order to claim damages and this claim of rights should not be asserted by an agent but by the sellers attorney. Where is YOUR agent in this process?

Secondly, this sounds like a used car sales. Salesman to sales manager "Sam he is willing to pay the $750."

Manager "Go back and hit him up for the floormats and see what he says, next we'll ask for something for the undercoating. We'll get all his money eventually..."

Going back and forth like this verbally is a lsoing proposition. Sounds like the agent double ended the home and it sounds like you are getting the short end of the stick. In any event, you need representation. Get it quick before you sign anything.
Web Reference: http://bob2sell.com
0 votes Thank Flag Link Mon Jun 28, 2010
It seems you have a seller who is trying to strong arm you. Getting your realtor and their broker involved would be the next step. Afterward's you may want to file a complaint with the DRE against the listing agent and their Broker if they are still trying to make you pay penalties outside the limits of the law.
0 votes Thank Flag Link Sun Jun 27, 2010
John, the inspections are usually paid by the buyer at the time of inspection to the inspection company. I am trying to determine what inspection fees were incurred by the other party. Something does not seem quite right here. It seems by your question you are using the seller's agent. If you are within your contingency period ALL your earnest money deposit should be returned to you.
0 votes Thank Flag Link Sat Jun 26, 2010
Before you agree to anything else and if you are represented by a realtor, have your realtor and his broker review the contract and what you agreed to do. If necessary, that broker may also engage the company's real estate attorney to protect your interests.

Generally, whichever party orders and authorizes an inspection is responsible for the cost of that inspection unless it is stipulated otherwise in your contract.

If you backed out before you released your contingencies, and most importantly if the reason for backing out is because you don't have loan approval, then you should be able to get your deposit back.

If you're using a standard CAR (California Association of Realtors) Cancellation of Contract, Release of Deposit and Joint Escrow Instructions form, it states "A party may be subject to 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)" So yes, if the seller refuses to sign, the seller may be penalized for up to $1,000.

I just had buyers back out of contract on one of my listings. Because they did it before they released their contingencies, the seller agreed to the cancellation and the buyers are getting their deposit back. And because they ordered (and paid for) pest inspection and property inspection, I asked the buyer to release those inspections to the seller so that we can use them as part of our disclosure package.

Good luck!
0 votes Thank Flag Link Fri Jun 25, 2010
First of all I would talk to your agent because the inspection costs are not your responsibility unless agreed upon in the transaction. The seller can use the same disclosure for another deal.

Second, cancellation charges are not your responsibility and your agent and his/her broker need to get involved at this point and handle it.

This sounds like a strong arm tactic and I would definitely get an attorney involved if this presses further. The only other solution would be for you to find another loan officer, but with this kind of seller I do not know if the risk warrants staying in the transaction.

Contractually Shan is absolutely right, there is no penalty for canceling the contract.
0 votes Thank Flag Link Fri Jun 25, 2010
You need to review your contract and possibly have a real estate attorney look at it.

Our contracts in Las Vegas all have a loan contingency in them, that if the buyer doesn't qualify, the EMD is refunded. Not being able to qualify is not bad faith.

Why did the seller pay inspection fees? Having an inspection done is usually a buyer's cost. Again, its usually something you pay for as the buyer to make sure the house is in the condition that the seller is representing it is.

What cancellation charges would those be? Can he provide an itemized list of these cancellation charges? Who is charging them?

You need to speak to your agent, and again may need an attorney to review your contract.
0 votes Thank Flag Link Fri Jun 25, 2010
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