Expert: Ray Beggs - 11/2/2006

Question
Thanks for the quick response! I do have a follow up question regarding the deposit we put into the contract.

We have put $150,000 as deposit when we signed the offer. Although the seller wants to fix the termite problem, we really don't feel comfortable to buy a house with termite problems.

We understand it takes some time to get the paperwork done, and the seller might want to consult a lawyer. We can wait, but is there something like a dealine that the seller has to cancel or we have to goto mediation for this? We just don't want to wait too long.

Sorry for the long message. Thanks for the help!
-------------------------------------------
The text above is a follow-up to ...

-----Question-----
We signed an offer to buy a house in CA, but the house didn't pass the termite inspection. We want to cancel the contract. can we get the deposit back?
-----Answer-----
Hi Jing,

Houses don't really "pass" termite inspections. The termite report may have extensive repairs noted, but if they're repaired, then the termite clearance is issued. I guess, technically speaking, the termite report could even ask for the structure to be torn down and rebuilt and if the sellers are willing to do it, then it "passes" the termite inspection.

Now, here's the thing. If the sellers are unwilling to make the repairs that are called for in the termite inspection report, then you'd have to go back to your purchase contract and see if the termite inspection is a contingency in the deal. If it is and they won't fix it, then you can get out.

Even if it's not a contingency, you can always back out of the deal and take your chances in front of an arbitrator (if it got that far). I think you'd have a pretty good shot by arguing that you backed out because the house failed to meet an important criteria which could not be determined until the termite inspection was completed.

Best of luck to you,

Ray

Answer
Hi Jing,

I can understand how you could come to the decision to not buy a house with extensive termite damage, even if the seller has agreed to fix it. There is no deadline (unless there is one in the purchase contract) so in a case like this it would come down to a "reasonable" amount of time.

Here's what I would do. I would put in writing the fact that you want to cancel the escrow because the house failed to meet reasonable expectations regarding termite damage. Also, you'll want to put in the letter that you wish to cancel the escrow and get your deposit money back ASAP. Send letters to the escrow company and all real estate agents involved. Make sure that the seller gets one through his/her agent. Keep in touch with all of the parties and just follow it through until you get your money back. If this initial letter from you doesn't cause you relief, then I would get an attorney involved and have them send a letter to all parties.

Best of luck,

Ray