Did we breach our real-estate contract? And are we entitled to the earnest money?

[mjammy]

What is the name of your state? GA

We are the buyers. We had a realtor representing us as the buyer and the seller (dual-agency)-- she is a distant relative that we naively trusted.... We were supposed to close on Nov. 29, as the contract indicates. We asked for an extension to the 1st of December. They said ok. We never signed a unilateral extension, as required by the contract. She said we could sign it at the closing. On November 30, the realtor calls us and says that we will not be able to close on the next day because the financing for the loan is not complete, even though the sales contract said that it was "done".

We were unable to secure the loan listed on the contract-- a loan that we were told we were approved for---because the loan was contingent on showing that we had six months of mortgage payments in an account, which we did not have. For two weeks after the original closing date we work with the broker to get a loan. Her financing gets too "creative" for us (She was adding our name to paperwork for my mom's acct. and the bank refused to sign off on it...)

On December 13, we tell them we are no longer interested in buying the home, as we do not want to qualify for a loan on false pretenses.

On Dec. 14, the realtor calls us and accuses of "renigging" and breaching the contract and says that we must either buy the house or pay the 3% realtor commission fee ($5400), that we have forfeited the earnest money $500), and must also pay the $600 that the seller paid for some pest work that was done...

My questions:

Isn't it a "dead deal" as we did not sign an extension, and the contract expired on Nov. 29 at 11:59:59? We never signed an extension. Therefore, aren't we not obligated to pay them ANYTHING?

Wasn't it dumb of them not to get us to sign an extension?

Shouldn't they not have put "done" in the contract (regarding the loan obligation) when it wasn't really done? Isn't this considered that the financing "fell through", which means that a term that the agreement was contigent on didn't work out? As I understand it, there is usually a number of days written that you have to secure a loan, but ours said, "done."

Aren't we entitled to the earnest money, as the contract states that "the buyer shall be entitled to the earnest money upon a) failure of the parties to enter into a binding agreement, b)failure of any contigency or condition to which this Agreement is subject;..."
Furthermore, the realtor called US on the day before closing and said that we couldn't close because of the financing...-- WE WERE READY TO CLOSE!!

LASTLY,
How do we go about getting our earnest money back-- the Holder is their Broker of their real estate company. They are independent contractors of this company.

We think that they tried to intimidate us into buying the home through LIES, by saying that we were obliged to terms of a contract that was dead.

Please advise!

Thanks

[lcannister]

Did you ever present a letter from your lender stating they denied you the loan to the sellers?

I am not a real estate atty and to make a close answer would need to see all your documentation but it appears you broke the contract when the 29th came and went, if you did not present the denial before that date. A verbal agreement has no place in a real estate transaction.

Isn't it a "dead deal" as we did not sign an extension, and the contract expired on Nov. 29 at 11:59:59

YOU had a contract that stated you would close this loan on the 29th you broke that contract when you didn't and if you did not present a denial letter before that date or on that date.

But don't take my word others will come along to let me know I am totally worng.

[BelizeBreeze]

What does your purchase contract state SPECIFICALLY WORD FOR WORD regarding financing and it's contingency?

[mjammy]

Thanks.

I understand what you are saying, but we didn't get notice that we weren't approved UNTIL AFTER the 29th. We had no idea that we weren't approved.

We had been sent the good faith estimate and everything around nov 17th and were waiting on the broker...we were told that we were waiting on the paperwork to come out of underwriting and then we'd close.

We were ready to close, when on nov 29th, the realtor (dual agent) and mortgage broker called us and asked for the reserve money verification...that was the first we had ever heard of it...

On nov 30th the realtor called us and told us that we couldn't close b/c "they were looking for a better loan..." The broker and realtor were working together.

I have contacted the broker via email this past week and asked for a denial letter. She said we weren't denied, so I asked for the a approval letter...she now wants to talk...I am following up with her tomorrow.

Doesn't the fact that we didn't know about the until the day of the original closing date make a difference? I couldn't have given them a written letter during that periodbecause i didn't know until after that period. We wanted to close.

[BelizeBreeze]

Originally Posted by mjammy

Thanks.

I understand what you are saying, but we didn't get notice that we weren't approved UNTIL AFTER the 29th. We had no idea that we weren't approved.

We had been sent the good faith estimate and everything around nov 17th and were waiting on the broker...we were told that we were waiting on the paperwork to come out of underwriting and then we'd close.

We were ready to close, when on nov 29th, the realtor (dual agent) and mortgage broker called us and asked for the reserve money verification...that was the first we had ever heard of it...

On nov 30th the realtor called us and told us that we couldn't close b/c "they were looking for a better loan..." The broker and realtor were working together.

I have contacted the broker via email this past week and asked for a denial letter. She said we weren't denied, so I asked for the a approval letter...she now wants to talk...I am following up with her tomorrow.

Doesn't the fact that we didn't know about the until the day of the original closing date make a difference? I couldn't have given them a written letter during that periodbecause i didn't know until after that period. We wanted to close.

did you not see my question?

[mjammy]

The contract says...

"New Loan to be obtained: This Agreement is conditioned upon Buyer's ability to obtain a loan to be repaid in consecutive monthly payments with the terms below, secured by a first priority security deed on Property:

XXXXX


"Ability to obtain as used herein shall mean that Buyer, as of the closing date, is qualified to obtain the loan based upon the lender's customary and standard underwriting criteria. (If the basis of the loan denial is either or both of the following, Buyer shall still be deemed to have the ability to obtain the Primary Loan: 1) Buyer lacks sufficient funds to close; or 2) buyer is required to lease or sell other real property as a condition of obtaining the Primary Loan.

xxxxxxx

Loan obligations: Buyer shall a) make application for the primary loan within "done" days from the binding agreement date; b) immediately give notice to seller of having applied for such loan (or any subsequent loan), and provide the name and telephone number of the lender and the name and telephone number of the loan originator, and c) pursue qualification for and approval of such loan diligently and good faith. Buyer hereby authorizes lender to release information to seller and seller's Broker verifying the amount and terms of any loan for which buyer has applied. Should buyer not timely apply for the Primary Loan, Seller may terminate this Agreement if Buyer does not cure the default within five days after recieving written notice thereof by providing Seller with written evidence of having applied for such loan. Notwithstanding the above, Buyer may fufill the obligation to apply for the Primary Loan by applying for any other available loan with terms for which Buyer may more easily qualify. Buyer shall be obligated to close this transaction if Buyer has the ability to obtain the Primary Loan or any other loan for which Buyer has applied and been approved. Prior to closing, Buyer shall not intentionally make any material changes in Buyer's financial condition which would adversely affect Buyer's ability to obtain the Primary Loan or any other loan referenced herein. In the event any application of Buyer for a loan on Property is denied, Buyer shall immediately give notice of the same to Seller and promptly thereafter provie Seller with a letter from the lender denying the loan detailing all of the reasons for the denial."


Note, after we were told that we could not close because we didn't have the reserves and couldn't use that loan, we tried AGAIN, with a program that required two months reserves instead of two, again we were told that it didn't work out when we could not secure verification of an acct with that in it...

The contract says that we are entitlted to earnest money upon "a) failure of the parties to enter into a binding agreement b) failure of any contingency or condition to which this Agreement is subject...

Note, I don't know who the lender was, never saw any letters, whether pre-approval, pre-qualification, approval, or denial...or any loan contingency letters, clauses etc. I was told that I was approved, sent a good faith estimate, and was waiting for my paperwork to come out of underwriting.

Also, my signed contract does not include a "Binding Agreement Date"...don't know if that matters.

I am just confused, because we wanted to close, and were ready to do so-- the contract said that the loan was "done" and we had no reason to believe that it wasn't...what could we have done differently? We did everything in good faith with the loan and were waiting. As our realtor shouldn't she have told us that we would need to provide a letter to the seller (who she was also representing)? (Yes, I know in the contract)

Ultimately, the date that we were suppossed to close, came and went because we both agreed verbally that it would be extended to the first, but we never signed anything (either party), doesn't that make a difference?

Under Timing of Closing it says: "This transaction shall be closed on the 29th day of November, 2006 or on such other date as may be agrred to in writing by the parties. In the event the loan described herein is unable to be closed on or before said date or Seller fails to satisfy valid title objections, then Buyer or Seller may, by unilateral notice to the other party (which notice must be received on or before the closing date) extend the closing date and teh date for surrender of occupancy up to seven days."

Thanks!

[BelizeBreeze]

Send the broker a certified (RRR) letter demanding return of the earnest monies within 5 working days or you will seek legal counsel and file a complaint with the state board of realtors.

In reality, you are most likely in breach but this is so convoluted you may be excused based on the facts and the specific wording of the contract.

[mjammy]

Thank you. I will send a certified letter, but what is a RRR? Is that different from a regular certified registered letter?

And lastly, can you clarify things for me?

1) What should we have done differently once the realtor called us and said that we couldn't close? It was already after the 29th.

2) We didn't didn't sign an extenstion because the realtor told us we could just sign it at closing.

It seems like we were set up almost to breach the contract, unless we really knew what we were doing (of course, if I would have known what I was doing, I would have had an attorney review the contract BEFORE I signed it...)

3) I forgot to add that in addition to the commission, and loss of earnest money that they are saying that we owe for the pest control spraying that the seller did (obligation in GA is for termite report) what should we say about this?

[BelizeBreeze]

Originally Posted by mjammy

Thank you. I will send a certified letter, but what is a RRR? Is that different from a regular certified registered letter?

Return receipt required.

And lastly, can you clarify things for me?

1) What should we have done differently once the realtor called us and said that we couldn't close? It was already after the 29th.

You should have voided the contract by writing the above letter rescinding the offer and demanding your earnest money back.

2) We didn't didn't sign an extenstion because the realtor told us we could just sign it at closing.

Question of fact for the court to decide.

It seems like we were set up almost to breach the contract, unless we really knew what we were doing (of course, if I would have known what I was doing, I would have had an attorney review the contract BEFORE I signed it...)

That's why you NEVER use the same agent.

3) I forgot to add that in addition to the commission, and loss of earnest money that they are saying that we owe for the pest control spraying that the seller did (obligation in GA is for termite report) what should we say about this?

nothing. If they think they have a case let them bring it to court and explain why

[Ellerge]

BelizeBreeze offers good advice - the most important is " file a complaint with the state board of realtors".

[lcannister]

In reality, you are most likely in breach but this is so convoluted you may be excused based on the facts and the specific wording of the contract.

I still think you breached the contract but I think that agent would think twice before being scrutinized in court over her dealing in this if she decides to sue you for anything.

I think the "done" you keep referring to means the application process was already done NOT the loan.

I suppose they could argue you qualified for the loan but just couldn't fund it with the reserve fund. But you did not qualify for the loan if that was one of the criteria.

BB is right very convoluted document and do as she says and stop letting this agent jerk you around any more.