Will I lose my earnest money deposit?

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Will I lose my earnest money deposit?

I am currently in escrow for purchase of a property in California. My agent communicated to me in writing that I was approved for a loan and to remove the loan contingencies, which I did. Later, I found I was only conditionally approved, and one of the loan conditions cannot be met.

I have alerted my agent and the first lender to the loan condition that cannot be met. The first lender suggested that I falsify documentation to meet the condition which I have no intention of doing.

I have found a second lender that can provide the loan without the first loan’s condition, however the seller’s agent is not letting another appraisal take place.

My agent is now telling me in writing that I need to go with the first lender or I will lose my earnest money and the property because I could not close on time with the second lender. I would only like to close on the property and have no intention of walking away from the deal, which I can do if I just use the second lender, but this may extend escrow. What is my recourse?

Asked on February 26, 2016 under Real Estate Law, California

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 5 years ago | Contributor

If the delay is only a week or two, you can still most likely force the sale to go through, unless the contract of sale stated that "time was of the essence" in the transaction, since generally, a delay of that length of time, when time is not of the essence, would not be held to be sufficiently "material" or important as to breach the contract. Of course, if the seller refuses to go through, you may have to go to court to get an order to compel him to do so, and could end  up having to pay some damages or compensation to him for your delay, especially if the delay caused him to incur any losses or costs. (And also: while you'd have a good chance of winning giving a short delay, winning is not guaranteed or automatic--you could lose and be held in breach.) Offering to pay him for his additional costs and inconvenience, in order to secure his agreement to a new closing date, may be a good strategy.
A delay of several weeks or more would very likely be a breach of contract. If you are in breach, you lose your earnest money and don't get the house.
If the agent committed malpractice--i.e. was professionally negligent, or careless--you could potentially sue him/her for your costs or losses caused thereby.


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