Claiming Earnest Money from Sale of House. Advice Needed (real estate, apartment)

[Melsie]

I know a lot of realtors read these forums and hopefully some attorneys as well. To make a long story short, our house went under contract with a pre-approved loan. Buyers dictated the timing. Two weeks before closing, buyers decide to switch lenders. In the meantime, we made agreed upon repairs, signed a lease, and moved into an apartment. Three days before closing lenders decide to reject the loan. By this point the original lender has withdrawn their loan offer. Our contract has now expired.

We have tried to extend the contract; we asked to be compensated for additional expenses while a new lender takes care of the paperwork. Buyers refuse to recompense us. Can we claim the earnest money and put the house back on the market? Agent says that we need to call an attorney; he says that there is a loophole regarding delays in securing financing, but the financing fell through because the buyers switched lenders after the contract NOT because of the original lender. Why should we contact an attorney? Isn't this our agent's job? ANY advice is very much appreciated.

Melsie

[tomocox]

Originally Posted by Melsie

I know a lot of realtors read these forums and hopefully some attorneys as well. To make a long story short, our house went under contract with a pre-approved loan. Buyers dictated the timing. Two weeks before closing, buyers decide to switch lenders. In the meantime, we made agreed upon repairs, signed a lease, and moved into an apartment. Three days before closing lenders decide to reject the loan. By this point the original lender has withdrawn their loan offer. Our contract has now expired.

We have tried to extend the contract; we asked to be compensated for additional expenses while a new lender takes care of the paperwork. Buyers refuse to recompense us. Can we claim the earnest money and put the house back on the market? Agent says that we need to call an attorney; he says that there is a loophole regarding delays in securing financing, but the financing fell through because the buyers switched lenders after the contract NOT because of the original lender. Why should we contact an attorney? Isn't this our agent's job? ANY advice is very much appreciated.

Melsie

I am not an attorney, so I cannot answer your question with any legal authority whatsoever. I can only answer as how I personally feel.

Yes, it's your own agent's fault as the above story describes. Of course the agent has a right to reject this and may indeed have a case, but simply on the face of it, your agent should have negotiated that the cost of your improvements be placed in escrow and that in the event the closing failed, you would be entitled to the escrow. Kentucky law doesn't do a very good job of protecting innocent sellers such as you, but your Realtor should have been more involved. By the way, did your Realtor serve as a dual agent also representing the buyer? That adds a whole new aspect to the deal.

Regarding contacting an attorney, I would do it myself if I were you. You have a case, but who is responsible? This is for a competent attorney to decide.

[Melsie]

Maybe I used the wrong term. it's the amount in escrow that I'm talking about. Our agent, who is not representing the buyers, thinks that if we don't compromise further with the buyers that we are not entitled to the escrow. Does this seem right to you?

Thanks for your input, we'll be contacting lawyers in the morning.

Melsie

[tomocox]

Currently as I understand your originial post, you never had a right to the escrow or earnest money. What you do have a right to, as a competent attorney will advise would be the liquidated damages of the buyers offer. Now, if there was a financial contingency, or any contingency that would have voided the contract, you are up the creek without a paddle. You still have your home and it does have increased value because you did the repairs/improvements and should sell for a higher price, but you did take it off the market, you did specific repairs etc. So the case you have will be laid out by your legal counsel.

[lifelongMOgal]

Originally Posted by Melsie

I know a lot of realtors read these forums and hopefully some attorneys as well. To make a long story short, our house went under contract with a pre-approved loan. Buyers dictated the timing. Two weeks before closing, buyers decide to switch lenders. In the meantime, we made agreed upon repairs, signed a lease, and moved into an apartment. Three days before closing lenders decide to reject the loan. By this point the original lender has withdrawn their loan offer. Our contract has now expired.

We have tried to extend the contract; we asked to be compensated for additional expenses while a new lender takes care of the paperwork. Buyers refuse to recompense us. Can we claim the earnest money and put the house back on the market? Agent says that we need to call an attorney; he says that there is a loophole regarding delays in securing financing, but the financing fell through because the buyers switched lenders after the contract NOT because of the original lender. Why should we contact an attorney? Isn't this our agent's job? ANY advice is very much appreciated.

Melsie

An agent is not an attorney. If you read your contract it will also recommend you have an attorney to deal with legal issues.

Both parties must agree on the dispensation of the earnest money or you will not be able to accept another contract should you place your home back on the market. Did your financing addendum specially state that after "x" number of days the earnest money would no longer be returned to the Buyer should they default on the contract due to financing?

1) Read through all the paper in your contract and financing addendums carefully.

2) If you absolutely do not want the Broker to return the earnest money to the Buyer then you will have to hire an attorney to defend that postition. If earnest money was a few hundred it is likely not your time and effort and your time is better spent getting the home back on the market. If you are talking about $10K then you obviously have the means to hire an attorney.

[johnsonkk]

(another non-attorney opinion)

I'm confused as what money we're talking about. Are you talking about the "good faith deposit" that comes with an approved/legit offer to buy your property? Or are you talking about (escrow) money that is/was put up solely for repairs to be made on the property? Normally the escrow money, kept by the broker, doesn't switch hands until closing day.

If it's the good faith deposit, then I would keep the deposit, relist the house on the market and let the buyers take you to court if they feel that strongly about the money.

[tomocox]

In Kentucky, the terms "escrow," "trust," and "good faith," means the money a buyer presents to a seller as a symbol of consideration to accept a contract. This money is held in Kentucky by a licensed broker in a state real estate commission monitored bank account. This money is declared to be "no-one's money" while in the broker's account. Only the bank which holds the deposit can gain by the deposit. The money can be released by the broker only within specific guidelines established by the state.

The way I understand the law, because there were contingencies which were not satisfied, then the contract to buy/sell could not be closed and the monies must be returned to the buyer. The seller's only recourse as described in the op of this thread is to sue the buyer for damages relating to specific performance, hence, the seller must connect with an attorney to determine the best remedy for their losses.