In September, we entered into a contract to buy a house and paid $1500.00 in earnest money. We were working

Asked by Lisa, Oakmont, PA Fri Jan 23, 2009

with a realtor and signed a contract with several contingencies, including an appraisal being accepted by the FHA (we were already pre-approved for a loan). We paid over $1,000 for inspections and such, then two days before close we found out the FHA was not accepting the appraisal. We tried to find an acceptable appraisal, but were not successful. Our realtor suggested we sign an extension to the contract, but our mortgage officer was doubtful that this would be resolved, so we declined to sign the extension. Our sales contract said we were under no obligation to sign an extension. The seller refused to release our earnest money and our realtor abandoned us. The seller has already involved an attorney, so we consulted one as well and were advised to wait it out. Well, nearly four months have passed with no resolution. Does anyone have any advice?

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Kelly Gidzin…, Agent, Newtown Sqiuare, PA
Sat Jan 24, 2009
Hi Lisa,

From what you've said it sounds like your appraisal value did not meet the contract price. Is that correct?

If you have met all of the contingencies and obligations on your end of the agreement of sale, then I would think that you are entitled to your deposit money back. However, if your agent did not properly follow the correct steps called for in your situation then there may be a case for the seller to keep your deposit. I am not an attorney so I can't speak to whether that is the case or not. It's unusual in my experience for sellers to refuse the deposit money to the buyer without good reason to think the buyer failed to meet their obligations.

I am concerned for you that your attorney isn't giving you more information on the situation. Just like the other agents have stated, why does your attorney want to wait it out? What is he/she doing to help you resolve the situation? Inanna is correct in saying that the seller cannot technically enter into another contract. BUT, the key word here is technichally. There is nothing stopping the seller from taking the gamble you won't do anythiing about it if he/she enters into another contract. Once the seller settles with another buyer, your recourse to get your money back gets more difficult as you don't have anything to hold over him/her like the real estate.

You should definitely have a real estate attorney representing you. I would discuss with your attorney filing a lis pendens on the property. That will show up in the title search that a new buyer's title company will perform. I believe it will prevent the seller from settling with another buyer until your issue is resolved since the new buyer can't get clear title until you do. The seller has no reason to bring this situation to a head. He/she can just sit back and be satisified that you don't have your money or hope that you will split it in half with him. When there is a dispute regarding the disposition of the earnest money deposit, no one can touch that money until buyer and seller both agree on how the money is to be dispersed or a judge issues a ruling on it. Since you and the seller are obviously at a standstill on it, it will be up to you to force the issue in court. I would also speak to your attorney about whether your agent properly represented you.

One final note... If your agent used the PA Assoc. of Realtors agreement of sale form, then the agreement is defaulted to mediation unless you checked otherwise. If that is the case, you need to start the process of mediation first. Check your agreement of sale for the mediation section. It's located near the end before the signature page and not in the notices section.

Best wishes in this situation.

Kelly Gidzinski
Long & Foster Real Estate, Inc.
Office 610-353-1199
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1 vote
The Hagley G…, Agent, Pleasanton, CA
Fri Jan 23, 2009
Who is your title company. What do they advise? have you contacted your Realtor's broker for help?
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1 vote
Kelly Gidzin…, Agent, Newtown Sqiuare, PA
Mon Jan 26, 2009
Wow. I'm not really sure what was meant by "unique property." I honestly have not come across that situation. If I had been your agent, I would have immediately involved my broker of record for her guidance and advice. I also don't understand why because you choose not to sign an extension you are at fault for the sale not occurring. I'm not an attorney or a broker, but I lean toward Sharon on this in that the house did not appraise. Although I am neither an attorney or a broker. That's just my feeling on it with the information I have.

I understand your feelings on mediation, however you are bound by the contract you signed. If you don't then you will be breaching that term in the contract. Your agent should have better explained the mediation clause to you so that you could've opted out.

I understand your friend is helping you and that you don't have more money to shell out for an attorney. That was part of the reason mediation was created and added into the agreement of sale. It is a way for you to try to resolve your issue with the seller out of court and without out an attorney if you choose. It isn't binding, so if you do not like the outcome you can go forth with legal actions. I know it hurts, but you should give mediation a try. The seller will not have a change of heart and decide to release your deposit money. You are correct in that it may take a while to get another contract or worse he could decide not to sell.

It sounds like your options are:
1) offer the seller to split the deposit in half with you and be done.
2) go to mediation where you may come to a resolution.
3) wait it out like your attorney has suggested.
4) try to find a way to move forward with the sale either by challenging the appraisal if you can or with another kind of loan.

I don't know all the details to how your agent acted or didn't act on your behalf, however it does sound like further investigation should be taken. If your agent acted inappropriately, more than likely it was a violation of the Realtor code of ethics and not necessarily PA licensing law. Below are links to both the PA Assoc. of Realtors ethics complaints section of their website and the PA Dept. of State Bureau of Occupational Affairs complaints page. Before you lodge a complaint, review the code of ethics (linked on the site in blue) and then make another effort to speak with your agent's broker of record. He or she is responsible for your agent's actions or inactions. Since your agent is unwilling to step up and push on your behalf, then maybe the broker will, or at least explain to you in greater detail why the seller has a right to your deposit money if any. Who knows, the broker may even have their attorney step in and help you out. Remember though, you always catch more flies with honey than vinegar. Tread lightly and politely even though you are probably raging mad.

Good luck.
0 votes
Sharon Harris, Agent, Hanover, PA
Sun Jan 25, 2009
I would meet with the office broker and make sure you completely understand there stance.
Then take this information to your attorney. I agree that the Ernest money should have been return to you. The house did not appraise for the loan. You have a contingency in the FHA contract stating if it does not appraise then you do not have a Dael Correct?
Sounds like the sellers and the sellers agent are out of line here.
0 votes
Brian Teyssi…, Agent, Pittsburgh, PA
Sat Jan 24, 2009

WOW, is your agent a "Realtor" or just an agent, there is a difference and it sounds like they are not full time nor professional. First I would have to say contact an attorney as I am not one which you already have. If I were your Realtor, I would have delved further into what labeled this a "unique" property and try to get that thrown out. There are plenty of other loans out there, maybe not with such an appealing interest rate but they do exist. Is it too late to check with another lender? I have gotten my clients and myself financed when others could not.

Yes, I would have signed the extension to give you more time but that it water under the bridge now. Your agent suggested it and you decided not to, so the seller is entitled to the deposit. It is viewed as which side is responsible for the transaction not closing, the seller or the buyer? It was the buyer. Yes, you are out the $1,500 but the seller is out possible sales of the property in a better market so they could be out a lot more than $1,500. I would have explained to you better what the repercussions were before you decided not sign the extension.

You possibly could have gotten out with the interest rate contingency if it went up over the rate your agent put in the contract.

I liked what the one agent said, could you offer to split the deposit with the seller? Sometimes it is better just to learn and move on, that is your call.

Good luck.
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Lisa, Home Buyer, Oakmont, PA
Sat Jan 24, 2009
Thank you all for your responses. The issue with the appraisal was that it was being called a "unique" property and thus the FHA was not able to approve the mortgage. There is a clause to go to mediation, but that costs several hundred dollars, and we really do not have that money. We were told by our realtor that the costs of mediation were our responsibility and were not recoverable. We feel we did not do anything wrong, and do not see the point of mediation, as we would not agree to give the seller any of the money .

Our realtor did not represent us at all as far as I can see. The nationally known company she works for has not offered any help either. We were just informed that the seller was claiming he was entitled to all of the deposit. He claimed we should have signed the extension, and our realtor seemed to agree. She just told us we are on our own and walked away. Our attorney said to wait until the seller gets an offer on the house, then he will have to release our money. But in this climate who knows when that will happen. Our attorney is a friend (who does work in real estate law) who is helping us at no cost, as we really do not have money to pay an attorney.
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Tina D'Amato, Agent, Sciota, PA
Sat Jan 24, 2009

If I am understanding the situation correctly, it sounds like the home did not appraise. In Your contract the home is contingent upon appraising. If that contingency is not met (which it was not) and you did not sign an extension (which you did not) then you have every right to your good faith deposit back. (1500). You will not get your home inspection money back or the cost for the bank appraiser to go out to the property back.

When you contacted your attorney what were you waiting out? Did you speak with a Real Estate Attorney?
Regardless, with out bank appraisal you could not get mortagage committment, which would kill the deal right there and you still would have the right to your good faith deposit back.

Either I am missing a piece to this story or you should have gotten your money back!! Did you try speaking to your agents broker? What is there reason for not sending you your money. Was it simply just because the seller wouldn't sign the release of sale?
0 votes
Bill Eckler, Agent, Venice, FL
Sat Jan 24, 2009

It may be time for another contact with you attorney. If for no other reason than finding out specifically, what he/she means by waiting it out.

Good luck
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