How Easy Is It To Get A Deposit On A Contract Back If The Deal Does Not Go Through?
It really depends on the terms of the Contract of Sale and whether the Purchaser is in default or not. Generally speaking, if you have met all your obligations under the terms of the contract, and you cancel as permitted in the contract, you will have a legal right to a prompt return of your down payment.
However, each situation is unique, and there are many factors that play into whether a Seller is entitled to retain the down payment as damages. The best way to protect your down payment is to understand and be diligent on all the contract provisions. For example, if you pursue your mortgage without delay and you are denied funding by the lender and cancel the Contract of Sale prior to the mortgage commitment deadline, you should receive your down payment back pursuant to the mortgage commitment clause in the Contract of Sale. On the other hand, if you have been neglectful, non-responsive, and failed to follow through on deadlines or contract provisions, that conduct could put a down payment at risk.
In the NYC Metro area, it is normally the Seller’s attorney who acts as Escrow Agent, holding a Purchaser’s deposit until the closing. However, the Seller’s attorney, as Escrow Agent, does not independently decide what to do with the down payment. Instead, the Seller’s attorney is bound to act in accordance with the provisions of the Contract of Sale and cannot simply pay these funds over to the Seller without notice to the Purchaser and allowing the Purchaser an opportunity to object.
As a Purchaser, once you sign the contract, you are legally bound to comply with the terms and conditions and perform accordingly. Therefore, you should understand that there are certain circumstances under which a Seller really does suffer damages due to a default on the part of the Purchaser and feels entitled to compensation. The best way to avoid any of these worries, of course, is to only sign a contract that you feel 100% capable of backing up with action and intent.
Should A Buyer Ever Sign A Sale Contract Without A Mortgage Contingency?
The answer to this really depends on the Buyer. If a Buyer has liquid assets and wishes to proceed with all-cash deal with no financing, there is no need for a mortgage contingency, and the contingency should be omitted from the Contract under these circumstances. Both parties understand that the Buyer will be paying in full at the closing without a mortgage loan and the contract can be written without this contingency and the deal can be planned accordingly. Normally, cash deals close quicker than deals with a mortgage since they do not require lender approval and preparation.
However, for most of us, a mortgage is necessary or preferred to obtain home ownership. Therefore, the most residential contracts have a standard clause for the Purchaser’s mortgage contingency. This clause spells out the exact terms and obligations that the Buyer must meet to fulfill their part in getting a mortgage approved and funded. The Contract of Sale will include details such as the mortgage loan amount, term, type of loan, and the amount of time the Buyer must obtain a firm mortgage commitment. A mortgage commitment, also known as a conditional approval, should not be considered firm until the listed conditions can be confidently satisfied by Purchaser and the lender’s appraisal is completed and acceptable to the lender for the mortgage loan. As a Buyer, you should research rates and lenders, make a prompt application, and comply quickly and completely with all requests for signatures, documentation, and explanations. If you take these proactive and responsible actions and do not otherwise default on the contract, your down payment will be protected.
For more information on Getting A Deposit Back On A Failed Deal, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (800) 619-3570 today.
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