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I have a contract to sell my house in Florida. The buyer…

Hi I have a...

Hi I have a contract to sell my house in Florida. The buyer fails to close on time. They deposited $10k in the escrow. What options or rights do I have?

Lawyer's Assistant: What steps have you taken so far? Have you prepared or filed any paperwork?

Nothing

Lawyer's Assistant: Have you talked to a FL lawyer about this?

We already extended for more than 30 days No

Lawyer's Assistant: Anything else you want the lawyer to know before I connect you?

It seems not fair to me as a seller. I'd like to understand my options.

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Answered in 1 minute by:
5/22/2018
Attyadvisor
Attyadvisor, Attorney
Category: Real Estate Law
Satisfied Customers: 9,006
Experience: 30 years of experience in General Practice, Real Estate Law and Estate Law.
Verified

Welcome and thank you for your question. I will be the professional that will be assisting you.

That depends on what is stated in the contract. What is the reason for extension and why would the buyer fail to close? Is this a financing issue?

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Customer reply replied 2 months ago
I believe is financial. The bank is not approving the loan. My agent said is bank delaying but it's been over 60 days. If I give another extension to 5/30/18, I may waste another 10 days.
Customer reply replied 2 months ago
What's your recommendation?

Financing is a contingency in the contract. That means that the purchaser's ability to purchase your property is contingent on receiving an unconditional loan approval to close from the lender.

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I am not sure what conditions remain for the purchaser(s) but this can drag out for a very long time and you do not have to agree to any further extensions. I would need to see what the contract states with regard to the earnest money to see if you would have the ability to keep that money. Please ask the lender for a copy of the loan conditions. Are you working with a realtor?

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Customer reply replied 2 months ago
I'm working with realtor.
Customer reply replied 2 months ago
The contract is a standard purchase agreement. Not sure it mentions about earnest money.

If the purchaser has made the proper requests for extensions they are able to have their earnest money refunded. If they have not done everything properly, such as provided proper notice, they forfeit the earnest money. Depending on where the property is located in Florida different contract formats are used by realtors.

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Can you tell me what your contract states with required to the financing contingency?

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Customer reply replied 2 months ago
It's says the contract is contingent upon buyer obtaining approval of loan with 30 days. I attached the Financing section.

Perfect. Please give me a few moments to review the attachment.

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Customer reply replied 2 months ago
Here is the second part of the financiing section

The purchaser needs to be able to prove that they applied for the financing within 5 days from the effective date of the contract. They need to show that they have made diligent efforts to obtain financing and keep your realtor fully informed. After the 30 days they needed to request an extension when they were not approved. (You stated that you granted the extension.) If the Purchaser is not in compliance with contract language you provided they are in breach of contract and forfeit the earnest money. If they are in compliance it is up to you if you want to provide more time for them to secure financing.

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Customer reply replied 2 months ago
What's the typically process and time frame to forfeit the earnest money. I understand during the process I cannot list the property.
Customer reply replied 2 months ago
Also, what's the cost?

"What's the typically process and time frame to forfeit the earnest money. I understand during the process I cannot list the property."

They forfeit the money if you can show that they breached the contract. So this could have occurred if they failed to apply within the 5 days, they did not provide proper notice after 30 days, they didn't make diligent efforts to secure financing. We would need to if and when there was a breach of the terms of the contract.

You or your agent would send notice to the purchaser of the breach and let them know that you intend to keep the earnest money.

"Also, what's the cost?" I am not sure what you mean by cost.

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Customer reply replied 2 months ago
In this case I already gave extension twice, 30 days and another 7 days, and buyers still fail to close. Does it mean the buyers breach the contract? Most likely the buyer would not agree for me to keep the money. I believe title company will not release unless both parties agree or court order. That may take some time. The cost I meant is legal fees.

If the buyers have done nothing to violate the contract they are not in breach. The buyer and seller need to sign a termination agreement that sets out that you keep the earnest money if this is a breach. If they have done everything properly and do not receive a loan they can have the earnest money returned as they did not breach the contingency. Give me a few moments to address the cost.

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If they breached and they are unwilling to sign a termination agreement that gives the seller the earnest money I would try a demand letter from a local Attorney. If not you would need to file suit and the cost depends on how much the purchaser's try to fight the suit. Where in Florida is the home situated?

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Customer reply replied 2 months ago
In the this they applied for the loan and it's outside the agreed periods, are they breach of contract?
Customer reply replied 2 months ago
It's located in Oviedo
Customer reply replied 2 months ago
Seminole County

"In the this they applied for the loan and it's outside the agreed periods, are they breach of contract?" Correct

I can provide a link for local Attorneys that provide FREE consultations if that would be helpful?

Below is an overview of the law.

“In nearly every real estate purchase contract, the seller will require that the buyer deposit earnest money – a sum of money that the buyer puts into trust during the transaction to demonstrate good faith. The earnest money amount is often dictated by the seller, and can be a flat price or a percentage of the purchase price.

The purpose of the earnest money is to provide the seller with compensation in the event that the buyer backs out of the deal through no fault of the seller and in violation of the agreements in the purchase contract. This article will discuss the instances where the seller will be able to retain the earnest money, as well as the circumstances under which the seller must return the earnest money to the buyer.

Homebuyers Have Many Opportunities to Back Out of Purchase Agreements Without Losing Earnest Money

Home purchase contracts will have many deadlines laid out for meeting certain milestones in the purchase process. All of these deadlines can be negotiated by the buyer and seller, and it’s very important to think through what may be the appropriate amount of time required to meet each deadline, since once a deadline is listed in the contract, there is no requirement that either party be flexible about changing it.

At nearly each of these deadlines lies an opportunity for the buyer to back out of the contract without forfeiting the earnest money, so long as the buyer submits timely, appropriate notice of the intent to back out.

For example, one of the most common deadlines where earnest money can be at risk is the inspection contingency deadline. In the contract, the buyer should negotiate a date far enough out to allow for all desired inspections to be made. If, during those inspections, the buyer discovers something about the property that he or she cannot live with, the buyer will nearly always have the option to drop out by the deadline. So long as the buyer does so with timely, proper notice, the seller must promptly return the earnest money and move on with marketing the home to other potential buyers.

However, if the deadline has passed and the buyer discovers something else about the house that is objectionable, and drops out of the contract, the seller will likely have the option to keep the buyer’s earnest money.

Other common deadlines at which the earnest money is on the line include title review deadlines, deadlines to review all documents relating to the property, and – this is a big one – a loan contingency deadline. More often than not, it is after the loan contingency deadline when the buyer’s earnest money goes “hard,” or non-refundable. Because securing a loan can take awhile, the loan contingency deadline is often the final deadline in the contract, and is the last “out” for the buyer. If a buyer decides to not purchase the property after this deadline, it is likely that the seller will have the right to retain the earnest money…

to Do in a Dispute Over Earnest Money

The purchase contract is the first resource to consult when a dispute has arisen over whether earnest money should be returned to the buyer. The terms of the contract will govern the parties’ next steps. Often, the contract or state law will require that the parties attend mediation or arbitration before anyone can bring a suit to recover the money.

The home buyer and seller should also consult with the entity or person holding the earnest money and inquire as to what its procedure is in the event of a dispute. Most likely, the escrow holder will have a standard procedure or at least some advice about what happens next. Many states have very specific, systematic laws about how escrow holders must handle disputes over earnest money. Parties to a dispute will need to become familiar with these laws.

It’s also a good idea to consult with an attorney about your escrow money dispute, especially one who is good at negotiations. Almost no one is going to want to take the matter to court – it is probably in everyone’s best interest to at least explore the possibility that there has been a misunderstanding or that a compromise can be reached. Whether you are a buyer or a seller in a dispute over earnest money, keep in mind what the purpose of the earnest money is to the other side: for the buyer, the money was put forward to secure a right to purchase and show good faith. For the seller, the money was put forward so as to be assured of compensation for any time lost by taking the property off the market for the benefit of the buyer.

Unfortunately, there will be times when the parties exhaust their pre-litigation options or requirements and cannot reach an agreement over the distribution of the earnest money. At this point, the matter will have to be decided in the courts. If the amount of the earnest money is small enough, small claims court may be an option, depending on your state's criteria and monetary limits for these courts. Otherwise, a court of general jurisdiction will be able to hear and resolve the matter, but it will likely be a longer process during which neither the buyer nor the seller will have access to the earnest money funds.

The moral of the story is this: As a buyer, be diligent about your home-purchase-contract deadlines and always give proper, timely notice (per the purchase contract) of any intent to drop out.

As a seller, be aware that you will not automatically get earnest money if a buyer drops out, but you may be entitled to it when a buyer is in breach of the terms of the contract and does not complete the purchase.” https://www.nolo.com/legal-encyclopedia/earnest-money-what-happens-when-your-home-purchase-falls-through.html

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Please do not hesitate to ask me any additional questions that you may have with regard to this matter. It would be my pleasure to continue to assist you.

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You may not be familiar with how the site works. The Attorneys to not receive credit from the site for their time or with customers unless the customer provides a positive rating. We answer your questions in good faith, hoping for a good faith response regardless of whether the law is in your favor or not. If you were unhappy with my service please let me know that you would prefer to work with another Attorney and I will opt out.

Thank you for your consideration.

Attyadvisor
Attyadvisor, Attorney
Category: Real Estate Law
Satisfied Customers: 9,006
Experience: 30 years of experience in General Practice, Real Estate Law and Estate Law.
Verified
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Customer reply replied 2 months ago
Thanks very much for your advice.

It was my pleasure to provide general information to you. I am happy that I was able to assist you.

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