Expert: liznarr - 4/12/2009

Question
I put a substantial amount of money down on a condominium pre-construction in 2005 in the city of New Orleans.  Hurricane Katrina delayed by years the completion of the project to December 2008. During the course of those years my financial position changed drastically which prevented me from qualifying for a loan.  The builder/developer has refused my requests to return my initial deposit. My understanding is if I legitimately attempted to qualify for the mortgage but could not, my deposit is to be returned...am I correct?

Answer
Hi Kirk,

If your Contract of Sale states that the Contract is contingent upon your being approved for a loan, and notwithstanding any other language in your Contract to the contrary, then your earnest money should be refunded.  Read your Contract carefully to make sure that language is included.    Unscrupulous sellers will sometimes attempt to refuse the legitimate return of earnest money, or at a bare minimum, delay the refund.

If you haven’t already done so, have your lender prepare a letter of refusal for your loan and submit it to the builder/developer.  I would send it by certified mail and request a return receipt.  Give a deadline for returning your earnest money.  If they do not comply, you now have a paper trail to pursue this builder/developer.

Some thoughts for you:

1.   If the Seller/builder/developer is also a licensed agent, you can file a formal complaint with the Louisiana Real Estate Commission.  I’m being blunt, but an attempt to screw over someone’s money by a licensed agent is not well-tolerated by real estate commissions.  The web address for the Louisiana Real Estate Commission is http://www.lrec.state.la.us/

2.   If the builder/developer is also licensed by the State of Louisiana as a builder, there might also be some recourse by making a complaint there.  Also check to see if there are other complaints pending against the same builder/developer.

The web address for Louisiana State Licensing Board for Contractors is   http://www.lslbc.louisiana.gov/links.htm

On the left-hand column of the home page, you will see links to contractors’ licensing Law (check out Section 2189 on page 37), making complaints, etc.  I do not have time to research this for you, but I’m sure you are not the first person in your position; and there are people out there who can help you.

3.   If you had a licensed agent involved, and your earnest money is being held in a broker’s trust account, most real estate commissions have a provision to settle disputed earnest money.

If all the above fail, you probably should seek immediate legal advice on how to proceed.

I hope the above is helpful.  Good luck to you, and feel free to write again if you have additional questions.

Regards,
Elizabeth