I'm being asked to pay liquidated damages. The bank came back and said my loan was not approved. My agent is refusing to give me contract

Asked by Ktorres, 90037 Wed Jun 1, 2011

copies. My mon was trying to purchase a house and gave $3,000 for escrow. The bank had first approved her loan and they right before closing escrow they said the loan was not approved. Its been a year now and her agent has not been helpfull at all. She filled out a DRE but they recommended a small courts claim. The escrow company said they want $2000 of liquidated damages and we would not need to go to court. My mom does not know if she signeda Liquidated damages clause and her agent is refusing to give her copies of the contracts she signed. Can the sellers keep the $2000 event if it was the bank that backed out? if her agent is not being helpful who else can she get guidance from?

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Ron Thomas, Agent, Fresno, CA
Wed Jun 1, 2011
This sounds complicated:
1.) The bank approved the loan, then right before closing, they said no: Something sound fishey; Initially, did the bank approve the loan IN WRITING?
2.) "It's been a year now"; what happened during that year?
3.) she filled out a DRE; what's a DRE?
4.) "They" recommended Small Claims Court; who's "they"?
5.) Her agent refuses to give her copies of the contracts she signed; He was obligated to give her copies at the time she signed them. Also, we are required by law to keep copies for a period of 3 years for just this reason.
6.) "can sellers keep the $2000"; so far we have $3000 to Escrow, $2000 for Liq. Dam. and now $2000 for Deposit (?), I hope you can present it to the judge better than this.
7.) "If her agent is not being helpful..."
8.) How much was the DEPOSIT?
9.) How much money was in Escrow at the closing?

I am trying to conjure up a senario where all of these things can happen; and I can only think of one: After the contingencies were released, something happened to change the Bank's decision about the loan, (eg. she bought a car, she cleaned out her savings account, there were errors or false information in the loan application, her income or expenses changed dramatically,) . But even if this happened, I (as buyer's agent) would immediately apply for an extension to replace the lender.

It is obvious that there are some pieces of the puzzle missing: It would be interesting to hear what the Buyer's Agent had to say about this. I certainly wouldn't want to cast any stones just yet; in either direction.
1 vote
Brett Ehart, , Phillips Ranch, CA
Wed Jun 1, 2011
Everyone who recommends consulting an attorney must have missed that the amount in questions is $2000. This would be eaten up by attorney fees in no time. Get the contract, either from the broker or from escrow. If you are required to go to mediation, then that is what you will have to do. You would set it up with the association of realtors that the agents belong to. It will probably cost around $500. Otherwise, go to small claims court and plead your case. The judge will decide on the basis of fairness and law.
1 vote
Kathleen Bec…, Agent, Santa Monica, CA
Wed Jun 1, 2011
Hi Ktorres:

First off, you may obtain a copy of the contract through escrow as well. Im surprised that your agent won't give your mother a copy of the contract to review, especially in this situation. Escrow can not release money as liquidated damages unless there is mutual written agreement.

Secondly, you do need to review your mothers contract to determine if she signed off on the loan contingency, and if she signed off on the liquidated damages and arbitration clauses.

Your best bet is to contact a real estate attorney and get legal advice if your agent, the listing agent and escrow are not cooperating with you by giving you a copy of the contract to review. Her lender may also have copies of the contract.

You may also contact the broker of record for your mothers agent to attempt to resolve any issues and also get a copy of the contract.

Good luck!

All the best,

Kat Becker, Agent
Prudential California Realty
1 vote
Paul Rinde, Agent, Menifee, CA
Wed Jun 1, 2011
Sorry to hear of your mini nightmare. Escrow can only release the money to the seller if your Mom signed a cancelation of contract. If not the seller would have to take her to arbitration or before a judge if she did not sign the arbitration agreement. As far as the agent goes try speaking to the agents broker verbally and if that does not work ask for the contract in writing giving a weeks time frame to produce the contract. Be sure to send your request Return Receipt to document. And if that does not work report them to the DRE.

Good Luck!
1 vote
Eric J Soder…, , Pleasanton, CA
Wed Jun 1, 2011
Definitely contact her broker. I doubt that not giving copies of the contract is legal and it definitely is not ethical. THE LENDER AND ESCROW COMPANY SHOULD HAVE COPIES OF THE CONTRACT!

It does not matter that the bank decided to not give your mom the loan at the last minute. If your agent had you remove the loan contingency, your mom may be liable for damages.

The arbitration/ mediation and liquidated damages clause only changes how disputes are settled and how much either party may be held liable for. (3% of the value of the purchase price)

With regards to advice for your mom, a real estate attorney is your best bet. She may be able to get a free consultation.

Get that contract and see if the agent did not do their job properly. Not giving your mom the contract is suspicious and unacceptable.

Best Regards,

Eric Soderlund
1 vote
Matthew Bart…, Agent, Glendora, CA
Wed Jun 1, 2011
Hi Ktorres,

It's difficult to advise you for several reasons. First, I'm not a Lawyer and second, I have not seen the purchase agreement and all additional documentation. That being said, have you attemted to speak with your Broker regarding your situation? If the answer is yes, clearly you need help. I suggest you speak with a licensed Attorney that specializes in Real Estate law right away. Be sure to bring in copies of all documentation that you do have from the transaction. Make it clear to your Lawyer that your Realtor has refused to give you copies of all documentation. Good luck!

1 vote
Richard Schu…, Agent, Los Angeles, CA
Wed Jun 1, 2011
Did you remove the loan contingency? If not, then you should be able to get your EMD back. If you did remove the contingency then it sounds like you may be out of luck. I would suggest consulting an attorney at this point.
1 vote
Dorene Slavi…, Agent, Torrance, CA
Sat Jun 4, 2011
Dear K. Torres,
You should have copies of all the documents you signed. Since you are having such difficulties at this point I would recommend you speak to a lawyer who specalizes in Real Estate Law.
0 votes
Terri Vellios, Agent, Campbell, CA
Wed Jun 1, 2011
In addition to escrow, your mom's lender would have received a copy of the purchase contract. As stated, in California the law requires the agent to provide a copy of the signed document at the time of signing.

There will be a chain of events when has not been disclosed to us. Addendums, releases, inspections, lender letters, etc. If the escrow company is requesting $2,000 what is that for? Is it what the seller is demanding or were there fees, inspections, appraisals, etc. invoices from vendors your mom hired and they are still due and payable in escrow? We don't know if you used the standard C.A.R. contract or if it was a builder's contract or another regional contract.

The agent's Broker should have been involved in this long ago and if they are not up to speed they need to be.

All the best to you.
Web Reference:  http://www.terrivellios.com
0 votes
www.reosolut…, , Los Angeles, CA
Wed Jun 1, 2011
It sounds to me like you know the answer.
Go to small claims court and get your deposit back.
Bring proof that your mom was initially qualified, and that the bank denied the loan.
Your mom acted in good faith, the bank did not approve the loan. Very direct, very simple.
I believe if it goes over a year the funds have to be turned into the state and will be lost forever.
So I would hurry.
0 votes
Douglas Perez, Agent, Los Angeles, CA
Wed Jun 1, 2011
Dear Ktorres,
In my opinion, liquidated damage clauses in some contracts are unenforceable. Your mon relied on her agent representation. Have your mom talk to her agent and agent's broker at the same time request escrow for a copy of the contract. Set them a deadline to receive your good faith deposit. Otherwise, get your contract to an attorney and explain your situation.

I hope your mom gets her money back.

Best wishes 4 all,
Doug Perez
(323) 285-8864
0 votes
Janey Bishop, Agent, Encino, CA
Wed Jun 1, 2011
Either the agent's broker or escrow should be able to get your mother a copy (and should have already given her a copy, If she removed all contingencies she may be obligated. This seller had this home off the market for the escrow period and probably incurred costs so there is some legitimacy to the damages. Have the agent's broker help you work it out.

A solid agent is most valuable in the execution of the transaction.
0 votes
Kimberly Bur…, , Los Angeles, CA
Wed Jun 1, 2011
The answer to the question of can the sellers keep monies if bank backed out, depends on what your terms of the contract are. I have to agree with some of the advice given- get a copy of the agreement from broker(boss of agent), escrow, title or lender. This will tell you what you mom has agreed to. Maybe there is a chance that contigencies were not completely signed off on. You need to contact a real estate attorney to advise you, once you have a copy of the contract. If the agent is not cooperating or will not return calls contact her//his broker directly for assistance.
0 votes
Daniel Choi, Agent, Los Angeles, CA
Wed Jun 1, 2011
It is unfortunate that your mother have to go thru thsi unpleasant situation. Your realtor might not have predicted the bank refusing the loan at last minute. if you have any records whether e-mails, faxes that can support your case, it would be very helpful since your realtor is hesitant to release the records. Your other option would be to contact the escrow for a copy of the contract or any documents that your mother submitted thru her realtor.

I would talk with the broker of the agent who handled the transaction and try to resolve if the fault resides with the agent who did not counsel appropriately. A real estate lawyer might be another choice as long as you do not incur large fee.

All the best,

Daniel Choi
Nextage Capital Advisors
0 votes
Pat & Steve…, Agent, Westlake, OH
Wed Jun 1, 2011
At this point, I suggest that you consult with an attorney who handles residential real estate matters.
0 votes
Ron Escobar -…, Agent, Beverly Hills, CA
Wed Jun 1, 2011
It seems like a very complex question... The escrow cannot release any money without all parties approving of it, whether there is a liquidated damages clause or not. You should proceed in good faith and only sign off on the money release if you agree with it... otherwise it will stay in escrow and eventually be escheated to the State... after several years you may get it back from the State if you file a claim...

Otherwise you can file an interpleading cause of action in court or demand mediation or arbitration... but that may cost more time and money than the amount described in your note...

Goo d luck!
0 votes
Reny Monk 32…, Agent, Hollywood, FL
Wed Jun 1, 2011
HI KTorres,

You should contact the agent's broker, because ultimately the broker is held responsible.

If you do not get results you can always contact the D.R.E. The Department of Real Estate.

Good Luck.
0 votes
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