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Two years ago, my friend planned to purchase a home in Austin, Texas from a builder. The day he signed the contract, he paid $5,000 as earnest money. On the contract, there is a clause stated, “Upon execution of this Agreement, Buyer has paid to Seller earnest money of $----- (nothing). Buyer shall pay Second Earnest Money of $5,000, on or before 7-23-06 (the date he signed the contract) ….. BUYER UNDERSTNDS AND AGREES THAT THE TOTAL EARNEST MONEY DEPOSITS ARE NON_REFUNDABLE ONCE THE SECOND EAREST MONEY DEPOSIT IS MADE, subject only to the provisions of the VA provisions of the Finance Addendum.
However, on the check receipt from the builder, they marked that the $5K was for the first earnest money.
The agreement was for a built-to-suit home but the seller rejected almost all the changes requests. It took them 2 weeks to reply his changes request and that prolonged the process. Then, it took the seller another 2 weeks to send a cancellation form. At the end, the seller refused to refund the $5K earnest money and their reason is my friend was holding up the house for more than a month. Well, they haven’t even started the construction yet. He did not have a realtor to represent him and he lived out-of-state. He feels that the seller took advantage of his situation and intentionally failed to disclose all of his rights.
Can he argue that the $5K should be considered as ‘first’ earnest money, not ‘second’ earnest money?
And has anyone heard of ‘3 day right to cancel a purchase’? Does it apply to this situation? The seller did not inform him his rights at all, regarding to the earnest money. Should he have known that he could cancel within 3 days, he would have pushed the seller to respond to his change requests and possibly requested a cancellation within 3 days and got his $5K refunded.
He signed the papers. Did he read them and fully understand them ?
Tell him to read the papers and if he doesn't understand them to go see an RE attorney.
After the fact is a little late as you should understand this BEFORE signing on the dotted line.
Texas does not have a "right to cancel" when it comes to real estate purchases. You only have that on a refinance.
It looks like the builder wrote the contract the way he did on purpose which is to show that the first earnest money is $0 and the second is $5k. However, if the amount is $0, I would argue that there was then no earnest given, and the $5k would be a first deposit.
However, I am not an attorney, and most people on here aren't, hence we cannot give legal advise, only opinions. Your friend needs more than an opinion.
He cancelled it 2 years ago and has been tracing that earnest money. He complaint to the Texas Residential Construction Commission but did not get anywhere. So, now he is trying to use the 'right to cancel' to argue.
The TRCC is about construction issues with the house itself, not about contract issues. But as I said above, you only have the right to cancel on a refinance, not a purchase.
The buyer is responsible for the consequences of reading or not reading his own paperwork.
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