Expert: Karyn Foley - 11/13/2008

Question
Dear Ms. Foley: We applied for a 5% down mortgage for a home and put $1k earnest money down.  The bank did not clear the loan for 5% down but said that it would clear close if we gave 10% down. However, we do not have 10% and thus can not afford it. Our contract has a contingency based on financing in place. Yet we were told that we can not get our earnest money back because the bank did clear close if we could give 10%. This happened in Michigan. Is this true? Thank you very much for your help! Best,
Laura

Answer
Dear Laura:  I do not have a copy of your contract, so  I can only make suggestions.  Your contract should have stated IN WRITING that it was subject to or contingent upon your receiving financing with a maximum of five percent down payment.  It also should have had a time period in which you were to have received loan approval for that.  If that is the case, you should be able to receive your earnest money back.  That is what is in California.  If you had a real estate agent representing you, check with your agent.  If not, then check with a real estate attorney.  As I do not have a law degree I cannot give legal advice.  I am very surprised that any agent or any seller would have accepted your offer with only five percent down.  Most lenders today will accept twenty percent down, and in rare exceptions, less down.  Laws may differ from state to state, as will real estate practices, but one thing is certain, and that is all real estate contracts must be in writing.  Good luck, and let me know what happens.  Karyn Foley