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Hello,I recently put down a deposit for a house I was interested in. The bank did not approve the loan so when I asked escrow to release the deposit back to me, escrow informed me the seller is refusing to release it because he felt he was led to believe the loan would had been approved. Can a seller retain the full deposit if loan approval doesn't get approved???
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A seller can retain your deposit ONLY if "liquidated damages" were signed (by both parties) AND the client removed loan contingencies but failed to complete the transaction. If there were no loan contingency, "liquidated damages" would still need to be included in order for the seller to retain the deposit. In your case, if you didn't sign the "liquidated damages" provision of the contract, and your loan failed to go through, the seller has no right to retain your deposit.
Recently, California law has changed, imposing financial penalties for the willful refusal to return a deposit that should be returned. Ask your real estate agent to submit a cancellation of contract and a cancellation of escrow requesting the return of your deposit. Please be advised that if you did not use a California Association of Realtors contract (legally obtainable only through a real estate agent), the contract you signed may contain different stipulations regarding liquidated damages. If you're unsure about the provisions of your contract, contact your broker or real estate attorney for further details.
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