Nearing the end of a Sacramento short sale, my sellers had repeatedly requested a release of contingencies from the buyers. Their 17-day contingency period had passed a week prior. The buyer's agent continually ignored the requests. Then he sent an email saying that the buyers would release their contingency upon drawing loan docs.
Those buyers did not have that luxury. They were in breach of contract. It also told me that the buyers were fearful that their loan would not be approved through underwriting.
There was no reason to trust anyone on the other side of this transaction. The mortgage broker made and broke several promises to deliver loan docs, so his word was no longer valid. The buyer's agent did not live up to his promises, either, and the buyers breached their contract.
The best solution was to deliver a Notice to Perform to the buyers, giving them 24 hours to release those contingencies or the seller could cancel.
The question that comes up during a situation like this is whether the seller is entitled to demand the buyer's earnest money deposit. The answer, which may surprise some of you, is no. Should the seller elect to cancel the contract after the 24-hour period, the buyer gets back the earnest money deposit because the release of contingencies was never issued, even though the buyers may have breached the contract.
Buyers in Sacramento (and throughout California) must remove their contingencies in writing for the earnest money deposit to be at risk. At that point, if the buyers default, the seller may be entitled to the buyer's earnest money deposit. However, if the buyer refuses to release the deposit, a seller's option at that point may be to take the buyers to Small Claims Court. Yes, even during a Sacramento short sale, the seller still has rights.
Photo: Elizabeth Weintraub
Elizabeth Weintraub is an author, columnist for The New York Times-owned About.com, a Land Park resident, and a Land Park real estate agent who specializes in older, classic homes in Land Park, Curtis Park, Midtown and East Sacramento. Weintraub is also a Sacramento Short Sale agent who lists and successfully sells short sales throughout Sacramento. Call Elizabeth Weintraub at 916.233.6759. Put 35 years of real estate experience to work for you.
The Short Sale Savior, by Elizabeth Weintraub, available in bookstores everywhere and at Amazon.com.
Sacramento Short Sale Agent, Elizabeth Weintraub, has the answers to your Sacramento short sale questions.
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Elizabeth Weintraub is an author, home buying columnist for The New York Times-owned About.com, a Land Park resident, and a Land Park real estate agent who specializes in older, classic homes in Land Park, Curtis Park, Midtown and East Sacramento. Weintraub is also a Sacramento Short Sale agent who lists and successfully sells short sales throughout the four-county Sacramento area. Call Elizabeth Weintraub at 916.233.6759. Put 35 years of real estate experience to work for you. Broker-Associate at Lyon Real Estate. DRE License # 00697006.
The Short Sale Savior, by Elizabeth Weintraub, available at Amazon.com.
Lyon Real Estate is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan.
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The views expressed herein are Weintraub's personal views and do not reflect the views of Lyon Real Estate.
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You are right. Not only that so many rules are broken here, that someone should be in big trouble.
I wonder how many homeowners who would consider selling their home, and buying another, are too afraid of getting caught up in this kind of situation?
Both sides rights need to be protected of course and this situation as you described it is delicate, but the earnest money should not be held hostage outside the valid rights of the buyer.
Hi Terry, Jon and Gary: I thought it was strange that the buyer's agent believed he could get away with not releasing the contingencies. The sellers sent the buyers a Notice to Perform, which I emailed to the agent. He still refused to release the contingencies. I had to threaten to send the cancellation notice to push him into action. It shouldn't have come to that. But we received the release of contingencies, thank goodness.
WOW, glad it doesn't work this way in Georgia. You have X days that the EM is still refundable to the seller, but if they do not withdraw by stated contract period their EM is no longer theirs it belongs to the seller.
Elizabeth
What a danerous scenario, and situation. Buyers thinking they have the luxury to control a transaction never made a lot of sense to begin with. Times and deadlines are instilled for a reason, and they are binding. You are one busy real estrate agent there my friend.
Now, if the deposit was actually released to the sellers, who would be entitled: the sellers or the sellers' lender? That's what I'm curious about.
I don't like the process we have to go through now before Short Sale became so prominent our business was so much easier.
Here when one party or another is clearly "out of contract" with no communication and no hope of resolution..it's time to say "bye" and you do that with a Cancellation and Mutual Release....no guarantee of earnest money return...and life is like that...no guarantees !