Advice needed

4 Replies

Hello, 

I am currently in escrow buying a house from Fannie Mae, I discovered that the house is in a high risk Fire and flood zones, I decided to back out of the deal but it was after the 10 days inspection contingency, the asset management company declined and wanted to keep my $10K deposit, (although the Listing agent told me he would extend the inspection contingency because we couldn’t turn on the utilities within 10 days, but he never did)

the property will not positive cash flow after the extra insurance costs.

What do you guys think? Bite the bullet and continue with the purchase? or take them to small claim court and hope to get the deposit back? what are the chances of getting deposits back after the contingency period expires?

thank you all,

If you talk with insurance companies they may bring your insurance cost down if you do certain things like put in flood vents at lower elevations. If the extra $1500 to $2000 per year you will pay for flood insurance will kill your cash flow perhaps this was not a good investment to begin with but that said I would say its all up to you and what you can afford. 

I am wondering if you are financing the purchase and if banks will finance a house that is in a high fire and flood risk zone?

You can take the $10K loss or looking into what you can do to save on insurance or even if there is something you can do to add another bedroom for example. 

How are you financing it? If your bank sees it will not cashflow and therefore won't give you the loan you should be set because of the financing clause in many contracts. Also if your agent told you he would get it extended and didn't.... He could be on the line for it in some cases. I might consult with an attorney.

Originally posted by @Sam Kassi :

Hello, 

I am currently in escrow buying a house from Fannie Mae, I discovered that the house is in a high risk Fire and flood zones, I decided to back out of the deal but it was after the 10 days inspection contingency, the asset management company declined and wanted to keep my $10K deposit, (although the Listing agent told me he would extend the inspection contingency because we couldn’t turn on the utilities within 10 days, but he never did)

the property will not positive cash flow after the extra insurance costs.

What do you guys think? Bite the bullet and continue with the purchase? or take them to small claim court and hope to get the deposit back? what are the chances of getting deposits back after the contingency period expires?

thank you all,

Well if its in a flood plain.  You get approved for government insurance

https://www.fema.gov/national-flood-insurance-prog...

Fire I don't know lol.  I have never been to California.  We use earnest money.  Don't' put up too much earnest money 500 to a 1000 is good.  Unless someone balks at it.  They are going to try to get as much out of you as they can to keep you in the deal.  

try to talk to your bank financing the deal and tell them the fire and flood insurance policies just discovered and are bank required would put an undue financial burden on you and you no longer feel comfortable financing the deal. see if they could work with you to not approve the financing, provide a letter indicating they will not be approving the financing and allow you to submit to listing agent for your EMD back under the financing contingency clause if you had included one with your offer. talk to your buyer agent to see if you can use that clause to your advantage to get your EMD back.. You do have a buyer's agent right? otherwise, you are in a big pickle....

Don't use that much EMD in the future. 1000-4000 is more than enough... also always use a buyers agent if you haven't done so already...

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