Legal Question in Real Estate Law in California
liquidated damages to deposit made in escrow
we found a house in california san diego, we made deposit to escrow and we got approved on the loan, the last minute that we are supposed to close escrow, the lender told us that there are changes that happened and that they need to increase the monthly payment for another 500 dollars more because of the PMI, i told them that we cant afford that kind of payment and they have nothing that they can do about it. i called the lender and told them that it is too much for us to pay that kind of monthly, they told us that since we are approved, we cannot get the deposit back, is that true eventhough we did not make it to closing of escrow. i desperately need the advice, thanks
2 Answers from Attorneys
Re: liquidated damages to deposit made in escrow
I need to review all of the documents. It seems unjust and unequitible. On that basis alone the courts may provide relief. Contact me directly.
Re: liquidated damages to deposit made in escrow
First of all, are you represented in the transaction by a buyer's agent? If so, getting the deal closed is at least to some degree the agent's job and responsibility. This is why it is worth while to use a buyer's agent. If not, and the seller's agent is acting in a dual capacity, you could perhaps also inquire there for some assistance.
Next, remember that the refundability of a deposit usually will depend upon whether you have breached your agreement with the seller, and that in turn probably depends upon whether your contract to buy the property contained a financing contingency and whether that was formally removed.
If you removed the financing contingency based on a supposedly approved loan, a lawyer (or your agent) should read the recent correspondence from the lender to see if what you're calling "approval" is really an unconditional and binding commitment to lend, or whether there are conditions. Even so, asking for an additional $500 a month seems like egregious bait-and-switch.
A deposit forfeiture cannot exceed 3% of the contract price under California law. Whether the lender can be forced to perform in time to save your deal, or whether you can recover your deposit because you aren't in breach due to an unremoved contingency will probably require you to discuss the matter in person with your agent or an attorney, and I'd definetly recommend interviewing a local real-estate attorney with respect to the lender's possible liability for your losses, if any.
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