Hello everyone, found this forum doing research on the problem I'm having. What a great source of information! I'm somewhat of a rookie agent - <2 years in the game - and having an issue with a contract. I'm representing the buyer in the purchase of a lot upon which he wants to build a spec home. He had a pre-approval ltr from his mortgage broker. The contract contains a financing contingency that doesn't specify the terms of the loan - it says TBD instead. The buyer is required to provide written notice of loan approval to the seller, or the seller can terminate the contract. On Friday afternoon, 4 days before the financing contingency expired, my client notified me that he had been unable to figure out a satisfactory financing solution and may need to back out of the contract. He said he would talk to the loan officer again Monday and let me know if he could finalize anything by then. He told me on Monday that nothing had changed and that he was scheduled to travel out of the country the following day. I asked him if I could get him more time to work out the financing, would he be okay with that? He said he definitely wanted to make it work if he could, so I called the listing agent only to find out HE was out of the country! I then called the agent who was covering for the listing agent, explained the situation, and asked if she thought the sellers might agree to a 2 week extension. She said she thought they would, so I had the client sign an addendum requesting the extension. I also had him sign a release of contract form just in case before he left the country. I sent the extension request the next day - the day the contingency expired. The listing agent returned from his trip that evening, called me, and I explained the situation to him. He said he would discuss it with the sellers and get back to me the next day. Obviously, the extension did not get signed by the sellers that day, nor has it been signed since. Now, I don't think they are going to agree to the extension, and I'm worried my client may be at risk of losing his earnest money, since he didn't provide loan approval within the required time frame. We intend to send a notice of termination today based on a due diligence contingency, since that one hasn't expired yet. My question is, if we send the notice of termination, can the sellers take the position that we were already in default by not providing loan approval and thus keep the earnest money? Bear in mind the buyer was not denied a loan - he just wasn't happy with the financing options he had available for the purchase of the lot and for the cost of construction down the road, since his profit margin was too small to warrant the amount of risk he would have to assume. Thanks in advance for any advice. I've been up all night trying to figure out any possible problems and how to prevent them.

Usually a broker,title company,or the attorney holding the earnest money in the escrow would look at what events happened in the transaction and which party became non-performing,which in this case it's your buyer.Usually when you have contingincies that you muss meet and you miss those deadlines then you are in default and deemed to have waived those contingencies.

How much earnest money is it?

It's impossible to answer your question,it would depend on the earnest money and escrow trust laws of your state on what the process is.Then it would come down to word by word what the contract said and whether it was specific enough to be an enforceable provision in the the contract.

no legal advice,good luck

Locally: In the event the buyer was in default of the terms and conditions of the accepted contract, the buyer’s ernest money would be subject to forfeiture. But, if the buyer was not in default, then the buyer would be entitled to the return of his ernest money.

Important Notice: This information is provided as basic educational information by the author and is not a substitute for the advice of an expert and/or the advice of a lawyer. There is NO representation as to legality, accuracy, correctness of the herein information and the reader is strongly urged to consult an attorney in the relevant jurisdiction to ensure accuracy before acting on this information .

The question I have is, what does your contract say about receipt of contract paperwork? If receipt by agent is interpreted to mean the same as receipt by seller, you have in affect given notice prior to expiration to the seller, and upon refusal of buyers request by the seller, the buyer would be entitled the return of earnest money.

The approval deadline and your due dilligence deadline should be two completely different issues. If no-one terminted the contract at the loan approval deadline, then you just keep moving along just like the condition was met. Check your contract to see if it says anything about the sellers having XX amount of days after the deadline to terminate the contract. If they didn't termintate it right away or in the specified time frame, I would assume everything is full speed ahead until you get to the next deadline. That's an assumption without reading your contract... But the opportunity for the sellers to terminate the contract based on that deadline may well have passed and you buyer would be entitled to their earnest money if you cancel based on the due dilligence.

Thanks for everyone's input. After a long conversation with my BIC, I decided to notify the listing agent that we were termination the contract based on the due diligence clause. I sent him a release of contract signed by by BIC and asked him to get his sellers' signatures and return it to me. I also told him we were disappointed we had been unable to make the deal work, and let him know that I hoped I could work with him again. Knowing that the sellers were frustrated after having had 3 previous contracts fall through, I was worried they would make an issue of it, but they didn't. I did learn a few good lessons from the experience though, and I intend to get some clarification on our contract wording from our state association's legal team.