Expert: Dick Dennis - 2/23/2009

Question
QUESTION: I am a first time real estate investor. Recently, I was interested in a house in the Philadelphia area that was on the market for $45,000.  Based on my research (comparables in the area and rent value, etc.) and assistance with a real estate agent I agreed to $9,000 above the sale price. My offer was accepted by the seller.  Therefore, I proceeded with a home inspection, etc.  The home inspection went well and minor items were identified.  The house is fully renovated and in move in condition.  The appraiser's report valued the house at $47,000. In addition, the appraiser was not willing to adjust the appraisal because the sale price was low and lower than my offer, even though, I have comparables to support the value in the area. Also, I was pre-approved for above the original selling price I am unable to get a mortgage above the appraisal amount.  At this point, I have paid for a home inspection ($320), ordered a title (~$500), and completed the appraisal ($400) and loan application ($40).  My agent communicated to the seller that I can receive a mortgage for $47,000 therefore would the seller accept this amount.  The seller proposed that I pay $47,000 plus the full transfer tax.  I agreed to this proposal and then the seller calls the next day and said the seller's profit is approximately $1500 and proposing that we second mortgage the difference of $9,000.  The seller paid $20,000 for the house in October 2008.  Do I have any rights as a buyer to reclaim the additional funds that I have paid in good faith to get the house other than my earnest deposit that is specified in the contract? Also, do I have any rights to question whether or not the buyer is holding onto the house to now sell it to another person knowing that I can not get a mortgage greater than $47,000?  It seems unfair. I do not know why the seller had proposed an alternative option that I agreed to and then for the deal to be broken. Of course, I know that the sales agreement had not been adjusted so verbal talk does not count, I guess.  Thank you!

ANSWER: Shame on your agent, Camille. Your agent should know that no changes or alterations in the original offer/purchase must be in writing on new forms. Further, you did not indicate if the original agreement addressed whether the buyer can withdraw from the purchase if the lender's appraisal is lower or any other sticking points are not resolved. Also, you kept on calling it the "selling price" when you meant "listing price." So it was confusing. You said that the seller said this and that and you said this and that. None of that amounts to a hill of beans. If none of that was in writing and both parties agreed to the changes in writing, then nothing was said. Remember, in real estate if it is not in writing, it was never said.

If you want that house, then have your agent redraw the purchase agreement over again incorporating what you now know about the property. If either party refuses to agree with any point even with counter offers going back and forth, then you are wasting your time and you should get your earnest money deposit returned and go look for another property. Otherwise,  buy the house the way the seller is willing to sell and I wish you all the best.

Dick Dennis
dixiedee13@aol.com

---------- FOLLOW-UP ----------

QUESTION: Thank you for the reply.  Do I have any legal rights, the seller has put the house back on the market for the original listing price without me signing a release form?  I would like to have my earnest deposit back, that is stated in the contract, and the funds I have spent on a home inspection, appraisal, and title search.

Answer
Apparently, Camille, the seller and his agent is under the delusion that you forfeited your deposit some way. I recommend you send a demand to the seller, your agent and the seller's agent demanding the return of your deposit (via certified mail), as long as you have not done something that would make him think you just walked away from the transaction. If they do not respond within a month, file a small claims action (if your deposit is $7,500 and below) against the seller. And you might want to advise your agent's office manager that you might make them a co-defendant in that suit. Try that, Camille, and see how it works. I wish you well.

Dick Dennis