She could not get a loan 20 days into escrow. Can she get her earnest money back?
Generally, the answer should be yes. It obviously depends on the wording of the specific contract. But this is one of the things that people are most concerned about, and one of the contingencies that is almost always provided for.
If this is not clearly spelled out in the contract, your sister should review the language with a contract attorney to determine her rights. There are several excellent CA contract attorneys that are very active participants on Avvo. You cannot go wrong by dealing with any of them.
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No, not that long. The previse answer depends upon what the purchase contract says. If the contract is on the California Association of Realtors (CAR) form, and the box for loan contingency is checked. Normally, the loan contingency has a time limitation, such as 17 days from acceptance. It is rarely open until the close of escrow. As such, it is not very likely she will be able to get her deposit back. She needs to consult with a real estate attorney to see what her options might be. Most likely, she will need to at least demand mediation.
Frank W. Chen has been licensed to practice law in California since 1988. The information presented here is general in nature and is not intended, nor should be construed, as legal advice. This posting does not create any attorney-client relationship with the author. For specific advice about your particular situation, consult your own attorney.
Without looking at the way your sister's exact contract and contingency is worded, generally speaking, a loan-contingency clause states that the offer is contingent upon the buyer’s ability to obtain a mortgage in order to complete the transaction. If the buyer can’t get the needed financing, the contingency allows him or her to cancel the transaction and get his or her deposit back. So in your sister's situation, the contingency, unless waived, would remain a part of the contract and if your sister is not able to get a loan, then she would be protected by the clause and she would get her deposit back.
Your question is very general, but you are referring to a situation with specific facts that will influence the answer. In general, it depends on the wording of the contract. In California, many homes are sold under the California Residential Purchase Agreement and Joint Escrow Instructions form which is used by the California Association of Realtors. Under section 3H of that form, obtaining the loan is usually a contingency of the agreement, but buyer is to remove that contingency within 17 days (or other agreed time) after acceptance unless a box is checked which allows the loan contingency to continue until funding. Contingencies under the CAR agreement do not automatically expire. A separate form is required to remove the contingency. Until removed, the buyer may still cancel and demand the deposit back even if the contingency has expired. There may also be other contingencies that exist. For instance, the obligation to provide a transfer disclosure statement, and the right to cancel up until after the statement is given, provides a separate contingency. A conclusion should not be made based on your general question. A conclusion should only be drawn after a review of the agreement and other grounds for cancellation.
Answers on this site are only intended to provide general information. No attorney-client relationship is intended. Specific legal advice is only provided after a personal meeting in which detailed information about a client's particular circumstances and goals are obtained.
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