I have a question that hopefully someone is able to answer. My friend recently put an offer on a short sale home in Florida and is having second thoughts. The seller approved the price but they have yet to hear back from the bank (its been 3 months). She wants to know if she backs out of the contract will she get her earnest money back?

Thanks

Jennifer

This will depend on the contract your friend signed and the laws in Florida.

What does your friend's agent say? If she does not have an agent she should consult with a real estate attorney in Florida.

Your friend should have been instructed by their buyers agent that TRUE acceptance isn't until the bank agrees to the contract price. Until then the bank can decline,accept,or counter your offer based on their BPO value that comes in. Even though yes the homeowner signed the contract it means nothing without the bank as they are taking the loss to sell at that price.

Your buyer should have put for earnest money (upon acceptance) by the bank,servicer,etc. so that EM was not actually given until the bank said YES. Now the EM is tied up. Have the buyers broker review the contract to see if there is an OUT to getting the EM back.This short sale could drag on for months and months to follow.

no legal advice

Our experience here is that a buyer does not put earnest money upon initial offer on a shortsale. The EM would be required when the bank accepts the offer (as the process can take MONTHS before hearing back from the bank, a buyer would not want to have my money tied up, specially if the buyer is interested in making offers on other properties).

Thanks for the replies.

Mark, her agent told her she was unsure whether she'd get her money back and is pretty unsure on many things. Maybe she should go straight to the broker with her concerns.

I will pass on the information. Thanks again.

What did the agent put for a closing date? I always say it must close 45 days after the offer is written. Most times short sales take way longer than that. That gets my client out of it if they want. I don't submit the earnest money until the lender accepts the offer.

I still get a mutual release signed by both parties.

I do write subject to lender acceptance also.

We agents don't do contracts here, but every short sale contract my buyers have signed had a specified a time limit put in by their attorney. After that the buyer could decide to get their money back and move on.

I specialize in short sales here in Las Vegas, which about 70% of the market are short sales. It is common for a buyer here to deposit EMD right after buyer and seller agree on contract, even before lender approval. In fact, I don't even consider an offer on my listings unless the buyer is willing to deposit EMD right away. The reason for this is committment from the buyer. We don't want buyers out writing contracts on many different homes just to cancel all but one later. It's a huge waste of time.

In regards to getting your EMD refunded, it will depend on your contract. Most likely you have many outs in the contract allowing you to cancel the transaction. However, in many states it is still required for both the buyer AND the seller to sign off on a cancellation agreement refunding EMD before the escrow company will release it back to anyone. So if the seller wants to be unfair and try to dispute the release of EMD back to you, they could have it held up in escrow for quite a while. This is why I always tell my buyers that there is always a possibility of losing the EMD, but the chances of that happening are slim to none.

Hope this helps...

Len if that was the case my buyer would put down as tiny a deposit as possible.

You technically don't need earnest money for consideration.A copy of an earnest money check deposited once the bank has signed off and junior lien holders should be sufficient.

Your market must be very different than in GA.

It doesn't matter what market you're in. We all agree that short sales take a few months on average to get approved. If the buyer doesn't have much earnest money deposited in escrow, they really don't have much of a committment to the deal. If they have a substantial amount of money in escrow while waiting for bank approval, it forces them to think twice before cancelling because of the longer timeframe. It gives them an incentive to stick around a bit longer than usual. They know their EMD is in jeopardy if they don't.

It's just another smart strategy used to avoid wasting time with a buyer that is gng to submit offers on multiple short sales with the intention to only buy one.

This is why I like buyers to purchase REO instead. In my area listing brokers list the short sale really low to entice a buyer. Most of the time the bank never approves that low of an offer and counters. Many times the buyers aren't interested at the higher price so you waited months for nothing.

I have known some short sales to take 6 months to 1 year.

I personally prefer REO's but will let buyers put offers on what pleases them after they understand the short sale list price is not a done deal.

I specialized in short sale in Fl, and it all depends what contingencies are on the contract between the Buyer and the Seller. Also the short sale addendum IF they signed any what it stipulates? Usually it will determinate when the contract will take effect either when the seller accepted or when the Lien 's holder does. I'm with Agent007 I always request EMD on all my short sale liting/buyers just to see how serious they are.

On my short sales I require the buyer to deposit 1-2k in escrow with no refund for 90 days. Locks the buyers, I also have a clause that states that if the Buyer cancels after the approval letter is issued by the bank the Ernest money is forfeited to the seller. I had one recently where the buyer had made several offers on and tried to walk, after approval, The buyer forfeited the money and the seller used it to move. The buyers agent had not read the contract.

I also require earnest money on my short sale listings. They're committed to the sale or they're not. If the buyer has some type of time frame issue that can be outlined int he contract, as I dont expect them to wait FOREVER...however they must be reasonable. I had one recently insist on 21 days...give me a break..I cant have my seller sign that - its unrealistic...but anyway - A short sale is just a contingency. Earnest money applies as in any other sale.