Chris, Home Buyer in Simi Valley, CA

Short Sale fell through - do we get our deposit back?

Asked by Chris, Simi Valley, CA Sun Dec 28, 2008

Here's the story--bid on a short sale home three months ago. Just found out in Dec. 08 the lender approved it BUT the actual letter of approval was not given to us to give our lender until 8 days after approval was supposedly given. So, now were on the last day when it should be funded per the short sale approval letter. We're not sure it's going to make it. My question is--if monies are not funded in time, therefore canceling the short sale agreement, do we get our deposit back? It seems that 8 days would have been critical for us to get everything done in time. Not sure who really is the blame--there are a lot of other issue with this particular sale as well. Also, we have not removed all contingencies.

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Ted Mackel, Agent, Simi Valley, CA
Mon Dec 29, 2008

No matter how great your lender is, you need certain assurances to fund a loan fast. I have had two transactions in the last 90 days where the money line was frozen on the lender ( I was the listing agent on both transactions). The lender had to repackage the loan and get funding with a new money source. Best scenario from submitting a complete package to funding was 5 business days on both. If your appraisal is 90 days old that could cause even more delay.

8 days is a big roll of the dice with a deposit on the line.

As far as your deposit. Check you contract language and any addenda you may have signed. Check all escrow instructions and amendments. You will still need the Seller to cancel escrow, before the money can be released.
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Dallas Texas, Agent, Dallas, TN
Sun Dec 28, 2008
Ask your buyers agent amended sales offer contract. There could be in executed contract regarding # of days past projected close date if closing does not happen on date scheduled.
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Bonnie Sterl…, Agent, Simi Valley, CA
Sun Dec 28, 2008
Wow Chris, What a pickle! Well, there are a couple of things.

If you want to purchase the home and the Seller really wants to sell the home, the Sellers Listing Agent can go to the bank and ask for an extension on the approval. I have seen them granted.

If the Sellers "side" of the transaction was just trying to "borrow time" from their lender by stretching the time they stayed in the house because they were trying to short sale it but really they were just trying to stretch their time of livng there and not paying mortage/rent somewhere, then you might not be able to make it work out. The way that you can probably tell if your Seller is serious about selling is if they delivered their notarized signed grant deed to escrow in anticipation of following through. You can also sometimes get a sense by IF they are still occupying the property, do they look like they are planning to move in the timeframe that was alloted?

If selling doesnt work because of a lack of interest in the Sellers OR the Sellers lender to make it work, you should be entitled to your deposit back. You hopefully have good documentation and you have your contingencies as your protection. Refunding a deposit still requires BOTH the buyer and seller to sign the escrow paperwork releasing the deposit and cancelling the transaction. I hope that your Buyers Agent limited the amount of deposit you put into escrow prior to having the written approval. There was a form that allowed your deposit to be withheld until your short pay approval (written) was given to you. Hopefully, that was how your deposit was attended to. If not, know for next time that you can work your deposit this way. If you have trouble getting the Seller to release your deposit, you probably have signed the arbitration and mediation clauses in your contract and will be subject to this delay. In order to avoid it, you might offer a small amount to the Seller to sign now and release now. Of course, you may want to seek legal assistance if it comes to this. Hopefully, one of the other options will be available to you. Also, if you are using a Realtor, you may be online seeking answers because you are not sure that you are getting the assistance that you need. Realtors have brokers, you could try to get assistance with the broker intervening on your behalf if you think your Realtor is not as knowledgeable as you had hoped. Good Luck. Short pays can be a great deal but they are sometimes a bit risky. take care,
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Jillian Mason, Agent, Monroe, NJ
Sun Dec 28, 2008
Yes, you will get your deposit back. As the others said, if you like the home and would like to proceed you should be able to easily get an extension-especially if you're the only bidder for the property. Good luck!

Jillian Mason
Direct: 732-586-5488
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Isaac Bensus…, , 92037
Sun Dec 28, 2008
Are you buying the property without a Real Estate agent? If you have an agent as I believe you must have, I am sure he or she can talk or he or she is already talking to the Short Sale's Listing Agent and arranging for a 10 or 15 days extension on the closing.
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Larry Watson, Agent, Moorpark, CA
Sun Dec 28, 2008
Hi Chris, From the explanation you gave on your deal you should get your deposit back. According to the CAR contract you would have 17 days before removal any contingencies. Why not ask escrow to get an extension on the short pay approval and continue to close on your purchase. Like with most short sales there are a lot of issues, its is imperative that the escrow company as well as the agents(on both sides)are well versed and work closely together to close the deal. I hope this helps, please remember without the full details of the situation it is hard to determine but based on the time lines you have indicated you should get your deposit. If you are still within the 17 days per the CAR contract and you do not want to continue with the deal, have your agent cancel the contract on the appropriate CAR form.
Sincerely, Larry Watson
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