I was wondering if you could provide me with some advice on a backing out of a purchase agreement. I’m in

Asked by Tammie Jenkins, California Fri Jan 25, 2008

the process of purchasing a condominium in Gardena California. I was pre-approved for 100% financing on a 30 years fixed. I made an offer that was accepted on Jan. 3. The seller made a counter offer and a day after I signed the counter offer, my realtor called me and told me that the lender who pre-approved me for a loan went out of business.

On the purchase agreement, the loan contingency removal is within 14 days and the close of escrow was supposed to be on January 31. I just got a call from my realtor yesterday saying that they got me pre-approved, which is 11 days after the contingency period. They also went up on the mortgage insurance, which added an additional $114 on the note and much more than I want to pay for. In addition, the closing date has changed to Feb. 11. Am I entitled to getting back my earnest money of $3,000? I also paid for the inspection report @ $250. Please advice.

Thank you!

Help the community by answering this question:

+ web reference
Web reference:

Answers

5
Alan May, Agent, Evanston, IL
Fri Jan 25, 2008
If you weren't approved for a mortgage by the contingency period (14 days?), then you should have requested an extension of that contingency period to allow you to obtain financing. If you did not request, nor get an extension, then the seller has every right to believe that you are approved. It sounds as though your Realtor was somehow involved in obtaining your new financing?? and s/he should have known to request the extension.

It is not the seller's fault that your mortgage insurance increased by $114.00, and I'm not sure who's fault it is that the closing date has been pushed back, but I'd guess it probably has to do with YOUR new lender.

Since you didn't extend, or exit the contract during the contingency periods, my guess would be that NO, you're not entitled to get your earnest money back, and you never had a shot at recovering your $250.00.
1 vote
Sandra Carli…, Agent, Newport Beach, CA
Sat Jan 26, 2008
Whether or not you are entitled to your deposit back will depend on several things. One, did you sign a Contingency Removal Form removing the loan contingency. Did you state a certain interest rate and that you were only looking at 30 year fixed loans on the contract (page one) or was this left vague and padded or God forbid, blank? Did you sign the liquidated damages clause? This is lawyer territory...

My question is, why you have been in this escrow for so long and passing the contingency removal period without loan approval? What has been going on for the 20+ days since you knew about the bank going out of business?

You may luck out and the seller will release the deposit from escrow if you explain the problem with the loan, but if he won't and you want your money back, you will need to contact a lawyer. The inspection money is probably gone for good, services rendered.

You should find a real estate lawyer by asking a friend or family member for a referral. I would go outside of the agent you are using on this one because I can't imagine having one of my buyers remain in escrow past loan removal without an approved loan.
Web Reference:  http://www.OCBeachBlog.com
0 votes
Sylvia Barry,…, Agent, Marin, CA
Fri Jan 25, 2008
Hi Tammie:

This is a question best answered by your Realtor because the Realtor is the one who knows all the details and intricacy of your contract which are very important to the direction to take. .

On the surface of what you are saying, you did not mention if you have removed the loan contingency or not. If you have not yet and you have passed the contingency removal period, the contract does not automatically cancel - either buyer or seller has to cancel the contract and release the earnest money, which needs signature from both sides.

Again, only your Realtor knows the specifics and the pulse of the listing side. You should consult with the Realtor and determine the next step.

You will definitely not be able to get your inspection money back - that's your own expense. .

Best,
Sylvia
0 votes
WatchingandW…, Home Buyer, Los Angeles, CA
Fri Jan 25, 2008
Just about every contract will have a Time is of the essence clause. Your agent should have extended the contingency.
0 votes
Don Tepper, Agent, Burke, VA
Fri Jan 25, 2008
Check with a real estate lawyer. It may not matter that the lender who preapproved you went out of business, so long as another lender would make the loan. But--and this is where the lawyer is important--the question may be whether the new financing is within whatever terms or limits were specified (if any) in the signed contract. It also may be relevant whether any paperwork went back and forth after the contingency period. I don't know California contracts, so I don't know whether the passage of the date alone is enough to nullify the contract or if there must be an affirmative action taken at the conclusion to nullify it.

But check immediately with a real estate lawyer.

Good luck.
0 votes
Search Advice
Search
Ask our community a question
Home Buying in Gardena Zip Codes

Email me when…

Learn more