Expert: Dick Dennis - 5/7/2009

Question
My husband and I opened escrow on an REO property, but unfortunately the deal went south due to a low appraisal. There was over a $70,000 difference in appraised value vs. purchase price, and the lender would not approve the loan.  Therefore, we had no choice but to cancel the deal, as permitted by the appraisal and loan contingencies stated in the purchase contract. We realize it was possible to renegotiate the purchase price with the seller (the bank), but we decided not to. Instead, we gave written notice (via e-mail) through our agent of our request to cancel the contract. Our agent and escrow officer also prepared the required "cancellation of contract, release of deposit, and joint escrow instructions" forms to be signed by the seller. We never did remove any contingencies in writing, and the cancellation notice was delivered within the timeframe prior to the agreed upon escrow closing date, so my assumption is that from a legal standpoint we should be entitled to get back our full good faith deposit.  My question is, is that a correct assumption?  Also, what is the legal timeframe (in California) for the seller to sign the mutual release for the return of our deposit? Is e-mail correspondence strong enough evidence that our agent submitted our cancellation/mutual release forms on a timely basis to the seller's (listing) agent?  I read in one of your past answers something about the need to send a certified letter and that the seller has 30 days to refund/respond or else we might need to head to small claims court ... would this info. apply in our case as well? In your experience, is it generally harder or easier to get back a good faith deposit from a bank seller vs. a private party seller?  Thank you for your insights!

Answer
You followed the proper way of doing this, Amanda. Just one thing. You were dealing with a bank. And they usually take about 30 days to return your money in this case, especially since it was an REO you were trying to buy. What did your Realtor answer to that question. I am the answer wasn't much different than mine. And how do you know if your Realtor actually delivered that email to the bank? Or did you send an email of cancellation to the bank, too? You'll get your deposit back, I am sure. You just have to be more patient.

There's one other way to work this. If it was me, I would have that Realtor find you another house in the meantime and if one is found, have your first deposit check used as a deposit for the second house you attempt to buy (providing you wrote the check to the Realtor's trust account). I do wish you well.

Dick Dennis
dixiedee13@aol.com