What happens to a deposit on a home sale whenthe contingency period is over but the buyer does not have financing?
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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 12 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.
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