DEAR BOB: We put our home up for sale in early October. Within a week, we signed a sales contract with buyers. Eight days later, the buyers backed out, stating they changed their minds. We opted to keep their $2,500 earnest money deposit. But we discovered the next day the real estate agent never received the $2,500 stated in the contract. We believe we are owed this money but have been advised to “forget it.” Who is at fault for not actually collecting the $2,500 and should we try to collect it? –Joy C.
DEAR JOY: Shame on that real estate agent. Unless the real estate agent told you the $2,500 earnest money deposit stated in the sales contract had not been received from the buyers and deposited in the agent’s trust account, that agent is clearly liable to you for the missing $2,500.
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If she refuses to pay you the $2,500 promptly, take her to local Small Claims Court to obtain a judgment against her. There is no valid excuse for a real estate agent ever bringing you a purchase offer to accept and not informing you she hasn’t received the $2,500 earnest money deposit stated in the contract.
Real estate purchase contracts do not include a “free look” allowing the buyer to back out eight days after the seller accepted the offer.
Of course, if there was a valid contingency clause, such as for the buyer to obtain a mortgage, that would be a legitimate reason to cancel if the buyer was rejected for a mortgage by several lenders. However, if the buyer never applied, then that escape clause can’t be used. For details, please consult a local real estate attorney.
REALTOR AGREES BUYING FROM FORECLOSING LENDER IS WISE
DEAR BOB: I love reading your articles, especially when I agree with you. Recently you said you prefer not to bid at foreclosure auctions but instead contact the foreclosing lender immediately after the auction if there were no bidders. I’ve been a Realtor about 15 years and this is exactly what I did when I purchased my home. By contacting the lender after the auction, I was able to get the lender to pay for a new furnace that needed replacing, erect a fence that was necessary around a pool, and I still paid about $6,000 less than if I had bid at the auction –Donald M.
DEAR DONALD: I always appreciate feedback on my articles, especially when we agree. Buying REO (real estate owned) from the foreclosing lender is the best way, in my opinion, to acquire foreclosure property. Many foreclosing lenders also offer very attractive mortgage financing to buyers of their REO properties.
LATE-PAYING BORROWER MIGHT BE GETTING READY TO FILE BANKRUPTCY
DEAR BOB: We hold a mortgage note on a property we sold about 10 years ago. The final payment is due in a week. A few days ago, the borrower called to say he might be late with the final payment. He said his mortgage broker was moving very slowly, and he even went to someone else to get refinanced. Last January, the title company asked us to fill out the paperwork for full payoff of this mortgage. In August, they requested an updated payoff demand. What are my options? I think the borrower might be trying to combine a couple of mortgages on several properties he owns. I just want to be sure he doesn’t take advantage of us –Linda L.
DEAR LINDA: Since you are dealing with a reputable title company, you probably have nothing to worry about. However, if the due date passes and the borrower shows no sign of paying the balance soon — after giving him an extra 30 days or so — I would suggest beginning the foreclosure process.
Most institutional lenders now give only 30 to 45 days’ grace period. Once you begin foreclosure, the borrower must pay your expenses, such as attorney fee, filing costs, etc.
I am concerned the borrower might file bankruptcy, thus delaying the time you will get your money. As a secured mortgage lender you are well protected, but starting foreclosure soon shows the borrower you mean business. For details, please consult a local real estate attorney specializing in foreclosures.
The new Robert Bruss special report, “How to Buy Fixer-Upper Houses with Little or No Cash for Fun and Fortune,” is now available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet delivery at www.BobBruss.com. Questions for this column are welcome at either address.
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