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Do I get earnest money back in short sale offer if no time contingency on addendum?

We made an offer on a short sale and the seller has accepted.  Sellers said they were close to being able to cover the deficiency and were going to try and not do a short sale, but we signed a SS addendum.  Our agent did not put a bank approval contingency or closing date contingency on the SS addendum, however we do have a Nov 15 closing contingency on the regular offer.

It is now looking like this will definitely be a short sale, and we are not crazy about waiting this out and want to keep looking at other properties.

My question is if we will be able to get our earnest money back since there are no contingencies in the SS addendum around timing for bank approval. Can we back out at any time and get a refund before the bank accepts? Could we at least back out after Nov 15 and get our money back, since that is the regular offer portion?  Thanks

  • October 25 2013 - Milwaukee
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Answers (5)

Someone sounds like they messed up on this one. It is - it isn't a short sale, sellers agent should know one way or the other. The bottom line is if there is enough money so the sellers can pay off the loan. That is the bottom line and what makes it a short sale or not. If they can get enough money to pay off the loan, the sellers don't need to ask the bank, they just pay off the loan and off they go. If they don't have enough proceeds from you and their savings or friends and family to cover the payoff, then they will have to seek the permission for the bank to allow a sale without enough money to pay off the loan.

If the contract turns into a short sale requirement, then you bet you have the ability to bail out because you now need the bank to agree to a short sale.

tim
  • October 25 2013
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If you were pursuing a short sale, the earnest money, and I'm referring to how things would work in Oklahoma, would not be due until the bank accepts the offer.  So, if this is a deal that went from a regular deal to a short sale, you went from being in contract to not being in contract, so it seems that you should get your earnest money back whether you pursue this property or not.  Based on the information provided, this would be what I would expect.  You might have your agent contact the listing agent's broker and ask them to adjudicate.  Good luck.
  • October 25 2013
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Yes, I think you will be able to get your EM back. What does your agent think?
  • October 25 2013
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I play the game like Peter. No earnest money until the lender issues a release letter on the loan. It saves a lot of time and takes pressure off the buyer. No matter what the day says on the Short Sale Addendum... the only safe way to kill a signed offer is a Cancellation/Mutual Release. Your agent should be able to help you with this. A lot of listing agents working with short sales will insist you don't need one and don't want to be bothered with doing the job right. But...those agents ARE NOT licensed lawyers. If the listing has 1 picture with the car mirror showing.. lots of luck.  If you can't get the seller to sign a Cancellation/Mutual Release -- which will return your earnest money --- you have to see your lawyer. If the listing agent says you don't need a mutual release, you may want to call their broker. If that doesn't get you anywhere, call the GMAR. Tell them the whole story and they may be able to help you. 
  • October 25 2013
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OP here - everyone was right saying we were not locked in without bank approval. Seller ended up claiming they could cover any deficiency with cash, and agreed to amend to remove the short sale addendum.  We are now under contract, so will see what happens.
  • November 20 2013
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