Should buyer get deposit back? WWYD?

[phorsenuf]

Just one more point about that financing being in order: unless she is just rolling in money or someone gave her that $700K house with no mortgage on it, her bank approval likely had an approval contingent on the closing of her current home. It's customary to write a mortgage approval in that way, and it's very likely that her bank would have halted the closing of the new mortgage when they did a final review of the closing papers. Don't be surprised if the bank goes back and does something like this.

Hey....that's what I said! LOL

Are you sure she was approved for the financing on your home without the sale of the other? What are the terms of that? Did you have a prequalification letter from her prior that spelled everything out?

 

[Chicago526]

Nope, that's what earnest money (deposits) are all about. If she wanted to protect herself, she should have made a contingentcy offer.

If she takes you to court, she'll lose, as long as what you say about the contract is true and there was no contingentcy.

Now, you can be a nice person and refund it to her, but I personally would not. I willing to bet that she didn't vet her own buyers well enough and she should have seen the deal falling through a mile away. If she did know if was iffy, and went ahead on your offer and didn't put in a contingentcy, then she's an even bigger idiot.

 

[bicker]

You definitely should keep the deposit. That's what it is for, to signify that the buyer is willing to share the risk of your turning down other offers. Unless the contract indicated that the deposit was refundable, under no circumstances should the buyer feel that they should be able to string the seller along and then be able to walk away with impunity.

 

[dianeschlicht]

As others haved stated, earnest money is just that and at least in our state, is forfeited if the buyer renigs. You have no obligation to give her anything back. You have been kept on the hook a long time and now is a horrible time to sell a house, so you have likely gone past the time when you would be able to get your best price.

 

[VSL]

Keep it.

 

[Am_I_There_Yet]

I'm an agent in Texas and unfamiliar with your contracts, so my advice/comments may not relate to your situation. This also shouldn't be taken as legal advice.

In Texas, besides our standard puchase contract, we have an addendum for sale of other property. Basically, it's the contingency addendum. The buyer has a certain number of days to satisfy the contingency, or they have to waive it and are responsible for buying the home regardless of whether their old one has sold or not.

Your first step should be to your state's real estate commission to see if there is indeed a form for this in your state. If there is, then it would be the buyer's agent responsibility to make sure it was presented at the time of the contract. There has to be something, even if it's just in special provisions.

You're talking about a very serious screw-up here. Someone, somewhere, failed to relay some very important information to you. Not only would this be an ethics violation, but a TREC violation here in Texas. I, as well as my broker, could get our licenses suspended for one of this magnitude. However - it is totally up to you, which direction you want to take with this.

You have options - go to an attorney, file a complaint with the state's commission (if the agent was at fault), sue for specific performance, keep the earnest money, all of the above, or you can do nothing at all and give the money back and take your lumps.

Best of luck to you and sorry about your transaction busting.

 

[Am_I_There_Yet]

In Missouri, a title company actually holds the deposit in escrow. I called the title company to ask them to turn over the deposit to me. They said they couldn't do that without written permission from the buyer. The buyer refused. My agent basically left me high and dry. She told me to go to small claims court. I finally called the buyer's agent and told them that I was going to take them to court. The agent asked me to hold off while he talked to the buyer. He told them they didn't have a leg to stand on, so they finally turned the money over to me.

Good luck!

As you mentioned, escrow is held at title companies here in Texas too. In order to get the money released, it takes the signatures of all parties involved, including the agents. We have an addendum for exactly this purpose.

These stories are just blowing my mind. What are these agents thinking? Or are they?

 

[phorsenuf]

It doesn't sound like there are agents involved otherwise it would all be handled by them. Was this a FSBO?

 

[phorsenuf]

As others haved stated, earnest money is just that and at least in our state, is forfeited if the buyer renigs. You have no obligation to give her anything back.

But I believe the OP said it was returnable if the financing falls through, so if her financing was contingent on her selling her house and she doesn't then she would get her ernest money back because he financing fell through.

OP, is that the case?

This whole thread I find very interesting, I'm curious to know more.
<sigh....I miss being in real estate>

 

[MrsNick]

But I believe the OP said it was returnable if the financing falls through, so if her financing was contingent on her selling her house and she doesn't then she would get her ernest money back because he financing fell through.

OP, is that the case?

This whole thread I find very interesting, I'm curious to know more.
<sigh....I miss being in real estate>

This is my understanding as well, that there does not have to be a specific contingency saying that the deposit is refundable if buyer can't sell her home, since there is already a contingency stating that the deposit is refundable if buyer can't get financing. A mortgage company would be quite unlikely to approve financing if buyer can't sell her other home. Therefore, buyer is unable to get financing, and therefore entitled to a refund. As rotten as this is for the OP.

However, laws are different from state to state, and you should probably consult a real estate attorney. Where I live, as a matter of fact, you are not allowed to buy or sell a home without having an attorney represent you from the beginning to the end of the process (contract thru closing). I don't think that's a bad thing. Even if not required, as real estate is likely the largest financial transaction that most of us will ever make, I can't imagine not wanting to spend a few dollars to ensure that everything is on the up-and-up.

Good luck to the OP.

 

[Mishetta]

If there is nothing in the contract stating that the sale is contingent upon the sale of her house, the deposit is yours. That is a huge mistake on her part to not include a contingency clause.

I agree wtih Cyndirella. Many moons ago my Mom had a house in Detroit to sell. We had a buyer, & that buyer put down a $2000 deposit (which was real money back 1984/1985). We were about a week away from closing & the buyers backed out. They found a home they liked better with central air a block away! Well, we ended up $1000 richer (since the R.E. lady got to keep the other $1000.) The money didn't mean anything to us since we had to cancel our move plans to California.

I feel bad for the lady who wanted to buy your house but she made a big mistake & her bad judgement shouldn't cost you anymore money. Next time she'd better know what she's doing before handing off $5000. This is her problem, not yours.

BTW, where in Shelby is the house located? We're interested in that area. Maybe we can talk you down $5000 too!

 

[Am_I_There_Yet]

It doesn't sound like there are agents involved otherwise it would all be handled by them. Was this a FSBO?

Maybe not, but I wouldn't be surprised. I've received contracts so poorly written, that I wouldn't submit them to my seller until they were corrected.

These agents are thrown out there with no training, other than textbook information and leave their buyers wide open for trouble.

If it was a FSBO - well, this is one reason right here why they're so iffy to get involved in. A good set of agents never would have let this slip by them.

 

[phorsenuf]

Maybe not, but I wouldn't be surprised. I've received contracts so poorly written, that I wouldn't submit them to my seller until they were corrected.

These agents are thrown out there with no training, other than textbook information and leave their buyers wide open for trouble.

If it was a FSBO - well, this is one reason right here why they're so iffy to get involved in. A good set of agents never would have let this slip by them.

You make some good points too as to why people should interview agents before deciding on one. Just because one may charge less commision isn't always a good choice.
Hiring an agent is no different, in my opinion, than shopping for insurance or finding a good lawyer.
But this is also a good example of why FSBO's can be risky.

 

[Am_I_There_Yet]

This is my understanding as well, that there does not have to be a specific contingency saying that the deposit is refundable if buyer can't sell her home, since there is already a contingency stating that the deposit is refundable if buyer can't get financing. A mortgage company would be quite unlikely to approve financing if buyer can't sell her other home. Therefore, buyer is unable to get financing, and therefore entitled to a refund. As rotten as this is for the OP.

However, laws are different from state to state, and you should probably consult a real estate attorney.

It can vary widely. Most addendums are created from lawsuits, and Texas has a financing addendum that is presented (or is supposed to be) with every contract. They buyer has a certain number of days to get their financing. The blank is filled in by the buyer's agent.

If they let that date pass and they don't, in writing, let the seller know that their financing has fallen through, the remedies for default apply.

The only 100% iron-clad way a buyer automatically gets their earnest money back in Texas, is if the home itself doesn't meet the underwriters standards. In other words, it can't appraise for the contract price, or issues of that nature.

By the way, in Texas we have a minimum of three addendums or notices that must be submitted with every offer. Four, if you're in the 'burbs and have no city water service. And these are for straight-forward contracts with no contingencies. Most FSBO's are as clueless as it comes about these.

 

[ChrisnSteph]

This a common situation when selling a home. Wasn't it obvious that she was a contingent buyer? This is something that should have considered before you accepted her offer. I understand your position because I have recently been there myself. We had a contingent buyer on our house. Everything looked great until at the last minute their buyer decided to buy two cars, and therefore could no longer qualify to buy their home. We would have lost the sale if they hadn't had a backup buyer. Anyhow, there is a huge risk when accepting a contingent buyers offer. I probably would have taken the other offer you had over the contingent one. Put yourself in her shoes - she's probably devestated that her home didn't sell and that she can no longer buy yours. I think your'e entitled to keep her deposit, but if it were me, I wouldn't feel right about doing so, unless there was obvious intent to deceive you or drag the escrow out longer than planned. And for the record, escrows get dragged on longer than they're supposed to more often than not.

 

[Hillbeans]

I would give it back only if it had been a few days which passed. In your case 3 months have past and you're now out of any chance of selling your house until the spring. I think in most real estate transactions you've got around a 10 day window to get it back (and here it was close to 3 months).

Although I feel bad for her, as the others have said, you turned down other offers. How much have you spent so far on this move?? Probably at least half to 3/4ths that amount anyways??

 

[Am_I_There_Yet]

You make some good points too as to why people should interview agents before deciding on one. Just because one may charge less commision isn't always a good choice.
Hiring an agent is no different, in my opinion, than shopping for insurance or finding a good lawyer.
But this is also a good example of why FSBO's can be risky.

YES! Especially in a case like this! That addendum or provision would have been the buyer's agent responsibility. Buyer's don't even pay the buyer's agent commission! It's a free service to them!

for real estate agents! Good ones anyway...

 

[Am_I_There_Yet]

One word about contingencies - I would never accept one unless I saw a contract on the buyer's other house. I would go further than that, and speak to that buyer's lender and make sure their financing was 100% and to the escrow officer.

Even then, contingencies are risky for so many reasons. I advise my sellers of all the pitfalls and I dread when my buyers want to use them.

 

[the kabuki]

Thanks for all the opinions. Sorry took so long to get back.

As for some of the questions raised, there were no agents or lawyers involved. Sale was NOT contigent upon her selling her home. Up until the day before everything was in order and ready to go.

This is my understanding as well, that there does not have to be a specific contingency saying that the deposit is refundable if buyer can't sell her home, since there is already a contingency stating that the deposit is refundable if buyer can't get financing. A mortgage company would be quite unlikely to approve financing if buyer can't sell her other home. Therefore, buyer is unable to get financing, and therefore entitled to a refund. As rotten as this is for the OP.

They buyer has a certain number of days to get their financing. The blank is filled in by the buyer's agent.

If they let that date pass and they don't, in writing, let the seller know that their financing has fallen through, the remedies for default apply.

In the contract it states- "If a firm commitment for mortgage cannot be obtained within 20 calendar days from the date of Acceptance, at Sellers' option, (upon written notice) this agreement can be declared null and void and deposit shall be returned. If Purchaser is rejected for the mortgage, Purchaser shall furnish the Seller with the lenders' written verification of mortgage denial. Upon Seller's receipt of such denial this agreement shall become null and void and the deposit shall be returned to Purchaser"

So I take from that, since she did obtain financing within the 20 calendar days and did not furnish a notice of lenders' denial , then default would apply here?

I see what you are saying though regarding her mortgage being dependent upon the money from the sale of her home. That is the one thing that sticks out in my mind, and yet according to the wording of the contract, wouldn't she had to have notified me within 20 days?

This a common situation when selling a home. Wasn't it obvious that she was a contingent buyer? This is something that should have considered before you accepted her offer.

I would be willing to bet that 90% of people, unless they're first time home buyers, have to sell their current home in order to buy another one. And yet, 90% of real estate sales that take place don't include a contigency agreement with regards to this(unless you live in Texas apparently). Which to me is what the purpose of the deposit is, so sellers' have some assurance that buyers plan on purchasing the home. Like I said before, had she wanted to include a contingency aggreement on the sale of her home, I would've gone with the first buyer instead. She's trying to sell a $700,000+ home in this market. No way would I have waited for her to sell that.

Originally Posted by phorsenuf
You make some good points too as to why people should interview agents before deciding on one. Just because one may charge less commision isn't always a good choice.
Hiring an agent is no different, in my opinion, than shopping for insurance or finding a good lawyer.
But this is also a good example of why FSBO's can be risky.

If it was a FSBO - well, this is one reason right here why they're so iffy to get involved in. A good set of agents never would have let this slip by them

.

Not that I have anything against agents, most are very good at what they do, but I am curious at this point what could an agent have done differently? I don't think it's a matter of letting things slip on by. Our deal was not contignent on her home selling, so legally one had nothing to do with the other. I've used agents in the past and the only time they ever received any info regarding the buyers' current home sale is when our offer is contingent upon their home selling first.We don't have the laws about property contingencies like they do in Texas. I personally spoke with her mortgage officer ( a local office) and financing was all set. Again, not to be snippy, just wondering what I could've have done differently.

This whole thread I find very interesting, I'm curious to know more.
<sigh....I miss being in real estate>

How about this one...her deal fell through due to what may be fraud. At least it sounds like it may be. Her buyers' were both bank employees'. They sent an appraiser , one that I'm sure was well known to them being in the banking/mortgage industry. Evidently, the appraiser valued the home at $70,000 less than purchase price, which coincendentally was about the same amount less they had put in their original offer.

Of course, they start bringing up to the agent (yes both buyer and seller had agent's) that they think the home price should be lowered. Obviously the seller (my buyer) didn't agree with this and had an independent appraisal done, which came back correct to the purchase price.

Well, somehow this 2nd correct appraisal never made it's way to the underwriting dept of their bank, just the one valued at $70,000 less and underwriting would not approve the loan. Of course, this only was brought up the day before closing, when the buyers' are well aware that she has already purchased a home, packed up belongings, and is anxious to move, especially because her divorce is being held up by the sale of this home. I guess they figured she'd be so desperate to close that she'd accept $70,000 less. When my buyer told me about it, it all sounded rather fishy to me. A month later, neither party could agree and get this-She ended up keeping their deposit. Yes, the buyer who is now demanding I give her back her deposit, kept her buyers' deposit!!

 

[the kabuki]

This whole thread I find very interesting, I'm curious to know more.
<sigh....I miss being in real estate>

If you really want to hear some real estate horror stories, check out this board: http://forum.freeadvice.com/forumdisplay.php?f=40.

Of course,mine's on there too waiting for a reply!