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Buying or Selling a Home/refund of earnest money if the house doesn't appraise
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Question
I was all set for a FHA 203K loan on a foreclosed home, and the home didn't appraise. The bank wouldn't budge on the price, and now they are refusing us a refund of our earnest money. I heard today from a home builder that it is illegal to not refund the earnest money on a FHA loan. How can I get my earnest money back?
Hi DON--
Whether or not an Earnest Money (EM) Deposit is REFUNDABLE or NON-REFUNDABLE depends on the verbiage of the Purchase & Sale Agreement/Contract between the Buyer and Seller of a property.
Most of these CONTRACTS are written with a FINANCING CONTINGENCY--that is the Offer/Acceptance is based on the Buyer's ability to obtain a certain type of financing (IE, FHA, VA, USDA, Fannie Mae Home Style, FHA 203K Rehab, ETC)
If the Buyer is unable to obtain the NEEDED/AGREED UPON financing, the Purchase & Sale Agreement automatically becomes NULL & VOID.
Unless the Contract SPECIFICALLY says that the EM Deposit is NON-REFUNDABLE, it is typically returned to the (former) Buyer!
If your EM is being held by the Seller/Bank & they're refusing to refund it, you MAY have signed it away per the Purchase & Sale Agreement between you an them. You should have an Attorney --or at least a State-Licensed Real Estate Broker-- go over your Contract with you to determine your rights with regard to a Financing Contingency &/or the EM Deposit. A LETTER FROM A LAWYER TO THE BANK MAY GET YOUR EM REFUNDED TO YOU!
If you feel that the Bank is in violation of Federal, State or Local "Standards," contact your State's DEPARTMENT of FINANCIAL INSTITUTIONS. They MAY help you get your Earnest Money back!
Hope this helps!
--JIM
Related Articles
- Deposits on Bank-Owned Homes - Earnest Money Deposits on Bank-Owned Homes
- Earnest Money-Earnest Money and the Real Estate Contract
- Earnest Money Deposits - Good Faith Deposits - What is an Earnest Money Deposit? Protect Your Deposit
- Deposit Receipt - Definition of Deposit Receipt - What is a deposit receipt
- Purchase Money Loan - What is a Purchase Money Loan
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Jim Root
Expertise
How to select the right Real Estate Salesperson & Loan Officer--ones who will serve your best interests! House-hunting tips & suggestions on selection of the home best for your family needs. Introduction to the Home Buying Process & all the "Players" involved.What is of utmost important to the Homebuyer? Real Estate Contracts & Negotiations, Appraisal needs, Title Co. involvement, Home Inspection issues& the Closing/Escrow systems, etc. Whatever your question, the answer will follow, whether from personal knowledge or research! Gale, shown here with me, has been a Real Estate Office Administrator, licensed Realtor & has served as my Research Assistant over the years!
Experience
Over 30 years as a "Real Estate Professional." including Real Estate Marketing & Sales, Appraisal work, Mortgage Banking & as a Realty Officer with U.S Dept. of HUD's FHA Homeownership Division in Alaska, Washington & Idaho! Some experience in Montana, California, Utah & Nevada markets!Knowledge of National Markets by continuous Research!
Organizations
Former member of Nat'l Ass'n of Realtors (NAR) & Mortgage Bankers Ass'n of America (MBAA). Currently with National Association of Review Appraisers & Mortgage Underwriters (NARA/MU).
Publications
Published in various local, state, regional & national Real Estate-related magazines & newsletters!Co-author of various Govt. publications on Homeownership, Appraisals & Mortgages while with HUD/FHA.
Education/Credentials
Associate Degree in Real Estate Studies plus:
Numerous Real Estate-related Courses conducted by the U. S. Government & Private Industry over the past 30 years.
Bachelors Degree in Mass Communications,
Masters Degree in Education/Teaching
Awards and Honors
Professional Designations: Certified Residential Originator (CRO) from MBAA, Registered Mortgage Underwiter (RMU) & Certified Review Appraiser (CRA) from NARA/MU. Outstanding Peformance Awards for 10 of the 12 years with HUD/FHA & numerous Sales/Listing Awards while a licensed Real Estate Agent.
Past/Present Clients
No longer selling/listing Real Estate, nor Appraising properties, nor working in the Mortgage business, this "Real Estate Pro" serves as Director of a Company that provides Professional Development Seminars & Workshops to the "Real Estate Industry" and provides free (as needed) & fee-paid (on a sliding scale) consulting & inspection services to members of the general public.Your questions will be answered without "salesmanship" & with your best interests in mind!
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