What happens to a deposit on a home sale whenthe contingency period is over but the buyer does not have financing?

Get Legal Help Today

secured lock Secured with SHA-256 Encryption

What happens to a deposit on a home sale whenthe contingency period is over but the buyer does not have financing?

I am selling my house in Sacramento and in contract with a buyer who signed off on all contingencies. The contract expired on 8 days ago but the buyer was unable to close escrow due to funding problems. My realtor did not request an extension on the contract and after I pressed her, she spoke with the lender and learned the buyer is not being approved because he is in credit counseling and making payments on consolidated debts. Today we sent him a cancellation notice (following notice to perform a few days ago) stating he owes us the deposit. Does he have to sign the cancellation? What do we do if he doesn’t? We feel fully entitled to his deposit but also want to move on and sell the house to someone else (we have a back-up buyer).

Asked on July 21, 2011 California

Answers:

Timothy McCormick / Libris Solutions

Answered 10 years ago | Contributor

If you used the standardized forms issued by the Cal. Assn. of Realtors, and followed the proper procedure for using them, and the buyer did in fact remove the financing contingency and then couldn't qualify, you are entitled to the deposit as liquidated damages, as long as it is 3% or less of the purchase price.  The buyer is obligated to sign the concellation and instruction to release the deposit from escrow.  If the buyer refuses, the cancellation is still effective (if done properly) and you can go ahead and sell to the back-up buyer, but you will have to take legal action to get the deposit from the original buyer released to you.  I have offices in Sacramento to assist clients in your area.  If you would like a free initial consultation, please give me a call.


IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

Get Legal Help Today

Find the right lawyer for your legal issue.

secured lock Secured with SHA-256 Encryption