Expert: Lisa Webber - 8/2/2009

Question
Greetings Mrs. Webber,

I recently entered into a contract to purchase a house in southern Maryland. I am attempting to obtain a VA backed home loan. My closing date has passed on July 31, 2009 and I was not able to obtain the funding in time. I wanted to extend an additional week until the CAIVRS report came back clear and the loan could be approved. The sellers Agent wanted us to put on the Addendum that we would pay 200 dollars a day until we closed on the property, which I declined through my agent. The sellers agent the next day then started showing the house. Is the contract at the end of the day null and void due to lack of funding at the VA funding addendum stipulates or did I break the contract and can incur penalties from the Bank that is selling the property? The VA addendum states that if funding is unable to be obtained then the contract is null and void notwithstanding any other points in the contract and the buyer is to incur no penalties and is due a full return of all earnest monies. Can you offer assistance with understanding? I believe that the contract is null and void due to lack of funding and should incur no penalties but my agent is stating we may have to pay the survey and title fees. Is this correct?

Answer
You made an offer on a foreclosed property.  In the bank addendums, there is normally an are that says if you settle past the expected closing that you'll pay a certain amount of money for each day past that day.  The last one we did was a $75/day penalty, so you always want to make sure you have plenty of time to close.

You did not break the contract if you have a financing contingency which every contract should have unless it is a cash purchase.  The financing contingency is there to protect you because even though your lender thought they could get you approved, sometimes things happen at the last minute, especially in this lending environment, that can delay final loan approval.  

You should be entitled to have all of your earnest money returned. Is your agent's company holding the earnest money or is it the bank's agent?  I have never had a buyer have to pay title fees or survey fees if a contract falls through.  Fortunately most of them do not but sometimes they do and it's not your fault that the financing didn't get approved by settlement.  

You need to tell your agent that you want all of your earnest money returned.  If your agent tries to take any expenses out of your earnest money, go to their broker.  Every Realtor works under a broker in Maryland and the broker is ultimately responsible for their actions.  Most of the time if you are having a problem that cannot be resolved to your satisfaction, the Realtor's broker will be able to help you.

I hope this helps - good luck to you!