Buyer Cancels Contract but request seller keep half the EMD deposit

This is new and different, the buyer on a property offered cash for one of my short sales, He had a commitment for a home equity line of credit at the time but his bank decided they are now not willing to loan him the money. He is elderly and I suspect it's his age.

Anyway, he has requested his binder be split with the seller, I am not sure Chase will allow this and really Chase has not yet even approved the short sale after 6 weeks, so I think he can pull out.

I am wondering how to handle this, any suggestions?

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California has an SSA (short sale Addendum) that states they will get their deposit back before contingencies are removed.

I'd check the paperwork.

 

It is only a short sale if in fact the bank receives less than a full payoff for the sale of the property.  If there is no sale - then there is no short sale - and in this case the lender is not involved.

 

This should be handled no differently than any transaction that gets cancelled.  The seller and the buyer are the only principals in the transaction - and so the decision on how to handle or disburse the earnest money is strictly between the principals.

 

In this case, Chase has nothing to do with this.  They are only involved if the property is sold as a short sale. They can decline to approve a sale - but if there is no sale - they have no part.

 

The seller still has the same mortgage obligation to Chase as he always did until a short sale or some other arrangement is worked out.

What would Chase have to do with the earnest money? Chase does not own the property because this is a short sale. They would only own the property if this were an REO- which it is not from what you are stating. Chase is not even a party to the contract. An purchase contract on a short sale is between the buyer and the seller- the seller being the person who has ownership of the property. 

The buyer and seller can make whatever agreement they want to. They can amend the contract, they can cancel the contract, they can split the earnest money deposit. It is all up to the contractual parties involved. 

Donna, As John stated, The Buyer and the Seller are the only two principals in this contract.  The lender, in this instance Chase, is merely a contingency of the sale. (Chase needs to approve taking a loss on their mortgage to allow the sale to continue).

You have a couple of other issues however.  1) Was the Buyer's offer / Purchase Agreement written as a CASH offer or did it have a Loan Contingency?  If cash he has no loan contingency (depending upon your state forms - in CA, Cash is Cash!) If written with a loan contingency then he should get all of his money back because his loan was denied.

2) Why do you think his age was a factor for the HELOC?  That's illegal.  Age discrimination in lending is a big deal.  If he has the income, credit and ability, he could be 100 years old and they cannot deny his loan based on age.

From what you've told us, my opinion is he gets ALL of his Earnest Money back.

 

Good luck,

 

 

If it were me, I would give him back the full EMD because of being elderly.  He had the committment from the bank and he didn't go into the contract with malicious intent to not purchase.  That's just my opinion.  Hope it all works out for everyone

Thanks everyone for your input, Sheila, he is elderly but not poor, his waterfront home is on the market, too bad he doesn't have a buyer for it yet. He is a retired military Commander with a healthy retirement. His credit score is in the 800's. This is why I fear his age may be a factor Thom, although the lenders are not saying so of course. he is in his 80's.

I really appreciate everyone's opinions, Thanks!

They have to give him a written denial with a reason.....

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