Legal Question in Real Estate Law in California

Re: Deposit for Escrow...do we lose it when?

It depends on whether the signed and initialed purchase agreement makes the deal contingent on obtaining a loan at a certain rate using your best efforts. It would be best if you have an attorney review the agreement before you decide to back out.

Re: Deposit for Escrow...do we lose it when?

I agree with Mr. Cohen....here are some additional general principles regarding failure to close escrow:

(1) By and large, the escrow holder is not a rule maker or decision maker. They follow the instructions given by both parties. They aren't perfect, but when a deal "craters" and someone wants his deposit back, it usually isn't escrow's fault if they can't refund it; the refund must usually be OK'd by the other party and if it appears that other party might be entitled to keep the deposit as liquidated damages, they can't return it until they have agreement or a bond or a judgment.

(2) Liquidated damages in the form of a forfeited deposit are usually limited to 3% of the price of the property in residential sales. If your deposit was greater, it should be refunded when the deal collapses.

(3) In determining whether Party X, Party Y, both X and Y, or neither have breached and must forfeit the deposit, or is/are harmed by aother's breach and hence entitled to damages, ordinary principles of interpretation of contracts would be applied. If the purchase agreement makes something a contingency, there is no obligation on the part of the party in whose favor the contingency runs until the contingency is satisfied or waived. There may be a duty to use reasonable and good-faith efforts to remove the contingency. In other words, if the deal is contingent upon financing, and you make no effort to apply for loans, you may lose the benefit of the contingency and be found in default.

(4) Many real-estate contracts have mediation and/or arbitration clauses. You should look to see if both parties elected or rejected these alternative dispute-resolution procedures.

(5) If you aren't using a buyer's agent, you might consider retaining one; ask whether their services can be provided to you at this point without any cost to you. This would give you a responsible professional to whom you could address these concerns.

Re: Deposit for Escrow...do we lose it when?

The contract itself will spell out the requirements.