Legal Question in Real Estate Law in Illinois
Earnest Money
I'm selling my home and accepted an offer on 10-19-07. The girl buying my home had a preapproval letter from her lender. We were suppose to close on 11-15-07. On 11-14-07 we were informed that we were not going to be able to close because there was a problem with the buyers financing. This is after we have already moved all of our things out, gotten final readings on all utilities, forwarded our mail, etc. On 11-26-07 we found out that the buyer for sure could not get financing. The reason she couldn't is because when she originally applied she claimed she was a student. She was not currently enrolled in school but had been in the past and was planning to enroll again in January 2008. Since she was not currently a student, the student loans that she had taken out in the past were counting against her affecting her debt ratio so she could not get financing. Who should get the earnest money??? I know the law protects her from losing her earnest money if she doesn't get financing, however, I feel that she provided false information that resulted in her not obtaining the loan agreement. Not to mention my house has been off the market for nearly a month while waiting on this.
2 Answers from Attorneys
Re: Earnest Money
Depends on the contract. When was the financing contingency finished. If it was open until the 14th, then she is entitled to a return of the earnest money.
Depending on the contract form you are using you may have a remedy in that she did not use good faith in obtaining the loan
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Re: Earnest Money
This is exactly why I hate preapproval letters. They mean nothing and cause far more grief and no good other then for the realtors. Enough preaching.
Without having the actual contract and knowing what the damage and/or liquidated damage clause is, I suspect that you could be succesful in a small claims suit. You need to name the buyer and the realtor who holds the earnest money as a defendant so that the court can order the realtor to tunr the earnest money over to you.
There is no guarantee. You might suggest to the buyer that you each get 50% before you file suit.
Good luck!
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