My escrow just blew up. Can I keep my buyer's deposit?

OOOH.. Tough break. No one's happy when an escrow falls apart. But whether the seller gets to keep the buyer's deposit comes down to two words.

It Depends!

Let's say the buyer has already removed all their contingencies in writing. Now they lose their job, or they find another house they like better, or they decide they can't stand each other, after all. They want out. In most cases, the seller would have a right to keep the deposit. After all the buyer backed out, AFTER removing their contingencies.

But HAVING A RIGHT TO THE DEPOSIT, AND ACTUALLY GETTING IT ARE TWO DIFFERENT STORIES.

In Fair Oaks and the Sacramento area, the buyer's deposit is typically held in escrow. Escrow is a neutral third party. Escrow needs both the buyer's and the seller's approval (signature) to do anything. And that includes releasing any money.

But if the buyer is stubborn, or is a jerk, or really doesn't think it's their fault the can't complete the sale, they may refuse to sign the release, even though they agreed to in the contract. Then, short of begging, reasoning, pleading or sending out Luigi, the seller has no option other than court - usually small claims court.

As a little twist, twice I have had a buyer back out, then leave the state. Now what? You can't file in small claims court against an out-of-state person.

So what happened to the $5,000 that was sitting in escrow... that rightfully should have gone to the seller? It's still sitting there today. My seller didn't get it, but at least the buyer didn't get it back either. Escrow can't do anything unless both sides agree. Ultimately, the escrow company will turn the unclaimed money over to the state.
An honorable buyer, who does what they say they will do, will sign the release, and turn the money over to the seller. After all... a deal's a deal. But that's why we have courts. Not everyone does what they say they will do.

Flickr photo by shyg's photostream

Does Your Lender make a Difference?

When a new buyer chooses a lender, what is their choice based on? Interest rate?, the trust of a referral?, who has the prettiest sign? Often it’s who seems to have the cheapest interest rate. What a mistake!

Consider Captain Sulley. He looked like everyone else who flew. He always landed those planes, so it’s hard to say how good he was. But when disaster hit, he was able to pull off the miraculous, and land a giant engineless jet in the cold frigid waters of the Hudson River. He used his years and years of experience, training, drills, and lessons learned from the inevitable mishaps he must have faced before to pull it off.

Your lender is the same. They all seem comparable… until disaster strikes. And when it does, you want experience on your side. A few months ago I sold a home in a great neighborhood of Citrus Heights, located 1/4 mile from a very seedy street (one of our areas worst). Any local appraiser would have understood to not use comps from the seedy street, as it was insulated from my buyer’s home by geographical factors. But as the crow flies, it’s another story. Our appraisal came in fine… actually above our price. It was the desk review that shot us down. It came in $60K low! Why, because the out-of-area underwriter used a zillow-like process to estimate the value… which included sales within a bull-eye radius. And that meant our seedy street became our comparable.

But my lender has been doing this for over 30 years, and understands the ins and outs of lending like the back of her hand. She whipped into action, and got the loan through. Did she use magic?, coercion?, bribery?... no. She used her experience to know which of the many paths to take to make it work. she could have gone a number of different directions, but she knew exactly the turns to make at each fork in the road, as she led our transaction down the path to a closed escrow.

So don't just pick the lender with the cheapest quote. It could mean the difference between getting your home or not. Always go with experience. Don't know who to call?
CALL ME... I GOT PEOPLE!

flickr Photo by mpflies2