Escrow deposit

Asked over 6 years ago - Clearwater, FL

We went into contract to sell our home, had buyer put $2000 deposit into escrow, along with the signed sales contract they provided a pre approved letter from mortgage company providing the finances. After a month of delays, we are told that he did not get approved for the mortgage, my question is Are we entitled to keep the deposit since he provided us with a pre approval letter, and we took the house of the market since we had this approval?

Attorney answers (5)

  1. Michael S ('Mike') Hagen

    Pro

    Contributor Level 13

    1

    Lawyer agrees

    Answered . Your entitlement to the deposit depends upon the terms of the contract for sale and purchase. The standard Florida Association of Realtors/Florida Bar Association ("FAR/BAR")contract, typically utilizes the second option (section IV(b)), provides that the contract is:

    "contingent on Buyer obtaining written loan commitment which
    confirms underwriting loan approval for a loan to purchase the
    property ("loan approval") within ___ days (if blank, then 30 days)
    after Effective Date....".

    The "preapproval letter", unfortunately, does not equate to a "written loan commitment". That preapproval letter is simply the initial opinion as to the likllihood of the buyer being ultimately obtaining written loan approval. The preapproval letter is only as reliable as the person providing it.
    The key will be whether the buyer has complied with the express terms of the contract. In addition to the aforementioned standard loan contingency, the FAR/BAR contains a requirement that the "Buyer shall use reasonable diligence to: obtain loan approval (line 41)..." as well as other terms pertaining to notification concerning loan approval or disapproval.
    Ultimately, it is in you best interest to have an attorney review the contract and associated documentation to advise you as to entitlement to this deposit.
    Sincerely, Michael Hagen

  2. Philip Laurence Coller

    Contributor Level 4

    1

    Lawyer agrees

    Answered . I tell my clients when they tell me the broker says that the buyer has a pre approval letter, not to put much weight in it.
    It is usually signed by a mortgage broker and not the lender itself. It usually has so many ways for the lender to get out of it. It is based on usually unchecked information. I would feel that if they did not recieve a written commitment letter from a lender in the time set forth in your contract that they would get their deposit back, provided they did what they were suppose to do to get the loan in a timely manner.

  3. Philip Laurence Coller

    Contributor Level 4

    1

    Lawyer agrees

    Answered . I tell my clients when they tell me the broker says that the buyer has a pre approval letter, not to put much weight in it.
    It is usually signed by a mortgage broker and not the lender itself. It usually has so many ways for the lender to get out of it. It is based on usually unchecked information. I would feel that if they did not recieve a written commitment letter from a lender in the time set forth in your contract that they would get their deposit back, provided they did what they were suppose to do to get the loan in a timely manner.

  4. Keith Robert Taylor

    Contributor Level 8

    1

    Lawyer agrees

    Answered . First, ask escrow agent, in writing, to tender the deposit. The escrow agent will only do this if the buyer agrees in writing. If the deposit is not then turned over, the rest is somewhat complicated and you should consult an attorney providing the contract and documents when you meet. Recently, realtors are using 1 of 2 different form contracts, although individuals can use just about any form found on the internet or at office supply store. Of the 2 most common, they are typically referred to based upon a notation at the bottom- 1 referencing Florida Association of Realtors (FAR) and the other Florida Association of Realtors and Florida Bar (FAR/BAR). Since the dispute involves a small amount when you consider the cost of attorneys, the form of the contract is critical. If FAR/BAR contract, there is a provision for the awarding of attorney fees; therefore, if it costs $5,000 to get the $2,000 and you can recover the $5,000, you can essentially be made whole. However, if it is the FAR contract, it provides for mediation (which you can request buyer to participate in), then neutral binding arbitration and NO ATTORNEY FEES. Whether you win on the facts is uncertain, but probably a second or third tier part of the analysis, following the above. If deposit is not paid after requesting, check your contract against the above and proceed accordingly.

  5. Frank S Hong

    1

    Lawyer agrees

    Answered . If the pre-approval letter was provided by a mortgage officer or mortgage broker then the letter does not have much weight. A mortgage official does not have the ability to approve the mortgage. The mortgage broker merely enters in some data from a potential buyer and makes a judgment call as to whether a potential buyer may be able to receive a mortgage.

    Real estate practices vary from state to state so you will ultimately want to approach someone in your area familiar with the local customs and laws, but typically every real estate purchase and sale contract contains certain critical clauses and one of them is usually a financing contingency. This means that if the potential buyer is not able to obtain financing the contract can be voided (by the potential buyer) and the buyer's deposit will be immediately refunded. I would advise reviewing the contract with your real estate agent.

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