How can we get a builder to return our earnest money as per our contract?

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How can we get a builder to return our earnest money as per our contract?

My wife and I went into contract about 56 months ago to build a home in CO with a well known builder. We went under a contingency agreement that said we had to sell our home in CA in order to get this home. We gave the builder $8000 earnest money. Since then we have had our home listed on the market with no luck selling it. We have decided to cancel our contract with the builder because we cannot sell our home and will stay in CA. The builder will not give us our earnest money back. They said we are approved for 2 mortgages, which is not true. What to do?

Asked on October 14, 2010 under Real Estate Law, California

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

The issue will turn on exactly what it says in the agreement. For example, is it that if you can't sell the home, you are not obligated to buy the new home, but the builder can keep the earnest money...or  does he have to return that money, too? Either would be legal, so the agreement could specify it either way. And similarly, is the contingency specifically a home sale contingency, or just a obtaining financing contingency? (And if the latter, why does the builder think you are qualified for two mortgages--is there some ambiguity in terms of what constitutes being approved for a mortgage under the agreement.) Also, are there any time frames for when a contingency would need to be invoked or not? You should take the agreement to an attorney who can analyze it for you, advise you as to your exact rights, and then take action, if appropriate. In contractual matters--like this--it will depend entirely on the terms of the contract.


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