If the seller isn’t signing the cancellation, how long do they legally have to do it?
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If the seller isn’t signing the cancellation, how long do they legally have to do it?
We were buying a home but the loan didn’t go through for no fault of our own. We have a right to our earnest money returned but the seller isn’t signing the cancellation papers. How long do they legally have to do so and what can we do? It’s been 17 business days.
Asked on June 19, 2018 under Real Estate Law, California
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 5 years ago | Contributor
Was there a "contingency," or provision, in the contract of sale, commonly called a "finance contingency" or "mortgage contingency," under which you are entitled to your earnest money back if you failed to get financing--and, if so, are you in full compliance with it? If so, then yes--you are entitled to your money back, and if the seller won't release it, you can sue the seller for "breach of contract," or violating the terms of the agreement. In that lawsuit, you can get a court order that the seller release the money.
If you did not have a finance contingency, however, or there was one, but you did not comply with it, you are not entitled to your earnest money back. When the buyer cannot go through with the purchase, even if the reason is not their fault (such as if the loan does not go through), the seller can keep the earnest money or deposit unless there is a contractual porovision (a contingency) to a the contrary. Without a contingency or similar provision entitling you to the money, it belongs to the seller because you are breaching, or violating, the contract by not being able to go through with the transaction.
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