How to risk losing your deposit
Sam Schneiderman, Broker-owner of Greater Boston Home Team shows you how easy it is to lose your deposits.
This is the true story about a buyer that did not follow through with the agreement that she made in the Purchase and Sale agreement.The purchase and sale agreement called for Kim (not her real name) to “submit a completed loan application within four business days of receiving a fully executed purchase and sale agreement from the seller”. When she signed the purchase and sale agreement, Kim also provided the customary deposit. The deposit was returnable only if she did not get a mortgage commitment by the mortgage contingency date specified in the purchase and sale agreement.
The attorney and buyer’s agent both reviewed Kim’s deadlines and obligations with her. Her buyer’s agent checked in with her to be sure that Kim provided everything she needed to her lender. In addition, Kim’s lender assured the buyer’s agent that the lender had “everything” he needed. Despite everyone’s best efforts to keep Kim and the lender on track, somehow she still submitted her mortgage application late. To make matters worse, when the listing agent called the lender to find out why she hadn’t heard from an appraiser yet, the lender told the listing agent that the appraisal was ordered late because Kim’s formal loan application was submitted late.
Here is a portion of the email that the listing agent sent to the buyer’s agent:…..It seems as though, even if the appraiser calls me right now, that Kim will probably not meet her commitment. Is Kim aware that she defaulted on her diligence to complete her application on time with [the bank]?…..The buyer’s agent forwarded the letter to the buyer’s attorney. Here is a portion of the correspondence that the buyer’s attorney sent to the buyer:
…..The listing agent checked with your loan officer at [the bank], to find out when he received your loan application. He told her that he received it on July 18, 2009. The Purchase and Sale Agreement was executed on July 8, 2009 and you had four business days to get it to [the bank], but didn’t for whatever reasons existed at that time.
Unfortunately, we cannot protect your deposit now because the application was not submitted in a timely manner. The seller will not agree to an extension of the Mortgage Commitment due to the delay and we cannot terminate the transaction for lack of receiving a Mortgage Commitment in order to protect your deposit. In order to protect the closing, I believe we may be able to get time extensions, but there’s no guarantee of this. Please know that [your broker] and I will be trying everything we can to protect this transaction from falling apart…..Due to delays in financing, the closing got delayed and the sellers threatened to put the property back on the market. They finally settled on charging the buyer money for each day that they needed to extend the closing date. Fortunately, Kim was able to close instead of forfeiting her deposit money, but dragging her feet on the mortgage application ultimately cost her a couple of thousand dollars and could have cost her deposit.
PERSPECTIVE:
It’s easy to put deposit money at risk when buying property if you don’t take your obligations seriously or do not pay attention to the details. This true story demonstrates how important it is to pay attention to the little details in a real estate transaction.
Don't let this happen to you or someone you know. When you bought, did you write down all your deadlines and stick to them?
