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Who gets the Earnest Money? DISCUSSION: Matt’s realtor is negotiating a contract for the sale of Matt’s property to Diane. The contract has the right price and lists no contingencies. Matt questions his agent specifically about whether Diane needs to sell her home in order to buy Matt’s home, and the agent points to the first page of the contract where the buyer has indicated that there is NOT real estate to be sold. The contract is executed and Diane begins the loan approval process. Three weeks before closing, Matt is contacted by his agent and told that Diane is "having trouble" with her loan because she hasn’t sold her property. One week before closing, Matt is told that Diane has not been approved for the loan and cannot close. Matt receives a copy of the rejection letter from the mortgage company, in which it states, "Since you have been unable to sell your house, there are insufficient funds for the down payment." The closing is canceled, and Diane demands the return of her earnest money. Matt refuses, pointing out that the contract clearly stated that there were no contingencies. Diane threatens suit, claiming that the contract failed because the loan was denied, not because she didn’t sell her home, and that Matt had been told three weeks before closing that she couldn’t sell her home. QUESTION: Who is entitled to the earnest money?
ANSWER: Matt is
entitled to the earnest money. The standard GAR contract requires
the buyer to initial a statement that he/she either "DOES or DOES
NOT HAVE REAL ESTATE TO SELL" in order to buy the property. The
contract further states that if "DOES NOT" is selected, loan denial
will not be grounds for refund of earnest money in case the property
fails to sell. Contradictory verbal statements made by the buyer
prior to loan approval have no impact and do not supersede the
written contract. |
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