Real Estate Q&A
We are very frustrated.The buyer for our home just canceled the contract to purchase our home nearly three weeks after we received the contract, because he could not get qualified for his loan. Our real estate agent told us that he gets his earnest money back and we don’t get to keep any of it. This does not seem right to us and we still don’t know why he did not get the loan. We think we should keep his money. We look forward to your answer. — Arnold and Grace, Orchard Mesa
Arnold and Grace,
I am sorry about the sale of your home falling through and I do understand how frustrating and deflating it can be when things fall through, especially as you near closing. If you have legitimate reason to believe that you have been unjustly dealt with, I would suggest you contact your attorney, but since you asked I will give you my take.
In the contract to purchase your home, the buyer and the buyer’s agent, filled in a date that indicated the buyer’s loan conditions deadline. This date, in a Colorado approved real estate contract, indicates the date on which the buyer must have his loan commitment from the lender or his earnest money will be at risk should he not close due to a loan failure. If he terminated prior to the loan commitment date, you have no right to keep any portion of the earnest money, as he is well within the dates and deadlines of the contract.
One item of note, in the Colorado contract to buy and sell real estate it states the buyer shall have the right to terminate on or before loan conditions deadline if the new loan is not satisfactory to the buyer, in the “buyer’s sole subjective discretion.” “Sole subjective discretion” means for any Colorado state-approved contract, the buyer can decide, for whatever reasons he/she may have, that the terms of the loan are not satisfactory to them and terminate. There does not have to be a legitimate reason — the buyer can determine that they no longer like the terms that they may have already agreed too and if that is the case, they are out and they get their earnest money back. “Sole discretion” is the key phrase here: it is up to the buyer and no body else has to approve or agree.
I know it does not seem fair, but unfortunately this is how the state contract reads and there is very little protection there for the seller in the case of a failed contract due to the loan conditions. So in your case, you give the earnest money back and get your home back on the market so you can find another buyer as quickly as possible. I hope you find a new buyer soon.
The Kimbrough Team, RE/MAX 4000, Inc