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socrateaser
socrateaser, Lawyer
Category: Real Estate Law
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Experience:  Attorney and Real Estate broker -- Retired (mostly)
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What is my liability for not putting down a deposit? Just

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What is my liability for not putting down a deposit?

Just entered into a purchase agreement (tomorrow will be the third day) and have not yet put down my deposit. If I need to back out now, what is my liability for simply not handing over the earnest money deposit?

The realtor put 3 days for removing contingency on inspections and tomorrow is 3rd day yet no inspection or reports were ordered.

There are multiple red flags around this deal that have just cropped up, including the realtor telling us that the appraisal won't come in high enough and we have to miraculously come up with at least $20K more for the loan to go through. She said we should continue and can cancel the agreement when appraisal comes out bad. Her reason for cancelling will be buyer decides not to continue. Is this valid reason for getting out of a contract because appraisal will go sour and appraisal contingency is unchecked (no contingency) ?

thanks
Submitted: 9 months ago.
Category: Real Estate Law
Expert:  socrateaser replied 9 months ago.
Hello,

If you have a standard Cal. Ass. of Realtors residential purchase agreerment (CAR-RPA), then Section I (eye) should state that appraisal to value is a contingency of the agreement. So, if the purchase price is too high, then you can tell the seller that you want to back out now, and that if he/she forces you to go through with obtaining an appraisal from a licensed appraiser, that you will have no alternative but to sue the seller to recover the cost, since it could have been avoided, by the seller not having offered the property at such a high price.

Hope this helps.
Customer: replied 9 months ago.
The realtor did not make appraisal a contingency. She unchecked it so that there's no contingency on appraisal.
What will happen in this scenario ? Also there's no section I on CAR form.
Expert:  socrateaser replied 9 months ago.
Do you mean "your realtor" didn't make appraisal a contingency?
Customer: replied 9 months ago.
She prepared the contract as such appraisal is not a contingency
Yes, my realtor prepared the contract.
Expert:  socrateaser replied 9 months ago.
Well, I'll tell ya what. In my opinion, that little detail is a breach of loyalty, and you could sue your agent for any damages incurred.

Re the contract itself, your next step would be to write a rescission letter to the seller, stating that your immediate inspection suggests to you that the property is not worth anywhere near the asking price and that you believe it was substantially misrepresented as to its condition, therefore you are rescinding/cancelling effective immediately. More than likely he/she won't sue, because there's no money in escrow, yet, and it's just not worth the hassle. I've never heard of anyone suing before the earnest money was deposited (except in ultra-lux properties worth millions).

There are lots of other contingencies, such as failing to qualify for the loan (e.g., "I lost my job," is practically guaranteed to stop the deal, because it means you can't qualify with any lender). So, that would be the next alternative route out of the deal.

Hope this helps.
socrateaser, Lawyer
Category: Real Estate Law
Satisfied Customers: 32916
Experience: Attorney and Real Estate broker -- Retired (mostly)
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