Can a real estate agent take earnest money if your loan fell through?

Question

My sister was trying to purchase a home. With the recent changes in credit scores, her loan didn't go through. Now the real estate agent has been telling her she has to sign a release of the money because the seller has a right to it to cover the cost of repairs. He said if she doesn't, they can sue because she backed out of the contract.

She didn't though. Her loan didn't go through! Please advise.

Answer 1

In the state of Texas - there are several factors to consider. If the loan did not go through within the required days in the Third Party Financing Addendum then your sister WOULD get her money back because the purchase is conditional according to the loan.

If the loan did not go through after the time period in the Third Party Financing Addendum, then she loses her Earnest Money and she is now a Cash Buyer regardless of her ability to get a loan or not. The seller can now take legal action for breach of contract.

My advice is: 1. Get all the facts pertaining to the contract 2. Get a Real Estate Attorney involved - they can help you.

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Answer 2

Read your contract, I am guessing you had an option period and that has expired. When this happens the earnest money becomes hard. However, you must look and see if the contract is dependent on buyer receiving financing or not. The standarized forms used in Texas have a box that is checked one if it is conditional and one if it is not. If it was not, then yes, you can be sued and probably have very little defense for breach of contract. And as previously mentioned the agent DOES NOT get the money. It is being held by an escrow agent and wants you to sign the release, so the money can be transferred to the seller. Are you working with the seller's agent, or do you have your own agent? I can't believe your agent would not have this dependent on buyer financing. But if you are using the seller's, I doubt it would be contingent upon financing.

Answer 3

I believe this to be incorrect. If she can furnish a letter from the lender stating that originally she qualified under a program that later changed, then the agent is in the wrong. There is usually 2 agents in a transaction, the one representing the buyer (selling agent) and the one representing the seller (listing agent). Hopefully this was not the agent representing your sister. And your sister's agent should not let the seller's agent get away with this. The market changes DAILY. Both agents should be aware of this and not try to take advantage of your sister. And it wouldn't be the agent to get the money if it was your sister's "fault", it would be the seller.

Answer 4

When my husband and I took our first time homeowner's class it seemed like if you made an offer and for whatever reason, if it was on your end, if you didn't come through, that earnest money is gone. That's the point of the earnest money, and the seller "deserves" it because they held the home for you... but the previous answerers are the experts, so I might be wrong... like they said, check the contract.

Answer 5

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Answer 6

she needs to read her contract but ,most purchase agreements have a clause that the agreement is contingent upon the buyer getting a loan, if not they can not hold yo liable for the purchase, and unless your sister acted in bad faith with getting the loan they should not be allowed to with hold anything
but as posted above need ot read the contract to see if the earnest monies was non-refundable

tell the agent if he/she does not return the monies to your sister file a complaint against the board of Realtors in your state and look to sue in small claims

Answer 7

The way the 2007 contracts read today, the earnest money is non-refundable, however it's a matter of how the contract reads. Normally, they can send the denial letter to the selling agent and they can reimburse the money.

Answer 8

if there was no contingency on the contract then yes, the deposit is forfit and the seller can persue damages for the rest. Normally they just dont bother.

Any offer to buy should have a contingency clause for things like loan approval, property inspection , or anything else that would affect the sale .

Answer 9

The agent doesn't get the money.

That doesn't sound right to me. Our loan fell thru and it wasn't our fault. Our agent and her broker have been fighting to get our money back for 8 months. The couple was getting divorced and the problem is to get them to come in to sign the release papers. The money is just sitting somewhere.

There must be something your sister isn't telling you or that she doesn't understand if they are telling her that SHE has to sign the release forms. The realestate agents and their brokers live by their reputations, they wouldn't lie to her. Sylvia

Answer 10

EARNEST MONEY IS JUST THAT.. EARNEST MONEY PUT UP FRONT IN GOOD FAITH...

IF LOAN GOES BUST--THAT EARNEST MONEY GOES TO SELLER FOR HOLDING OFF SELLING TO ANOTHER POSSIBLE BUYER......

SOMETIMES NICE PEOPLE RETURN IT---SOMETIMES PEOPLE AREN'T NICE....BUT HEY---ITS LEGAL....
DON'T OUT MONEY UP UNLESS ONE IS 100% SURE---GET THE DANG LOAN APPROVED BEFORE YOU EVER POST EARNEST MONEY.......