I'm really hoping someone can help me out on this one. I'm a first-time investor, purchasing a foreclosure, and I'm concerned that if I back out of this contract, I may not get my earnest money, even though it appears the seller (the bank) has done illegal things. I realize I may be wrong, considering I'm a newbie.
Here's the story: I found a foreclosure that was listed at $105K. It needed a fair amount of work, so I offered $82K Cash. The very next day, the listing agent told us that our offer was approved! Unbelievable, right? We were thrilled, and sat waiting, and waiting for a contract to sign. So, about a week and a half later, the listing agent told us that the INVESTOR (who apparently had to give final approval) was now saying that they could NOT accept $82K, and that they could accept $84K (since that was 80% of the listing price--I'm rounding off all numbers here btw), and that we had to agree to having no due diligence/inspection period. Hmmm, ok, we could buy that, but it sucks that we sort of got lied to right off the bat. So, we proceeded to say OK, we'll pay $84K.
So, we waited, and waited, and waited for a contract to sign. THREE weeks later, the listing agent told us that the seller (the bank or the investor, who knows?!) was now saying that they could not accept $84K, and that now they would only take $89K. Ummmm, that was weird. They basically just countered themselves. And they lied again. We were weirded out, but I really wanted to get this house. So, I convinced my husband that we should accept the $89K, but ask for the inspection/due diligence period back. So, we accepted, and waited, and waited. FINALLY, we got a contract to sign on Friday, July 28.
We signed, and got an inspection 3 days later, on Monday, July 31. While we knew the outside AC unit was missing, and we knew of just about all the other issues, the one major thing we learned from the inspection was that the heat pump was missing from the attic. That's a big expense. That same day, we sent an amendment to the seller, asking for $7k off the price, bringing it to $82K. After 3 days, on Thursday, August 6, we got a response from the listing agent, saying the seller agreed to a new price of $86K. We agreed, that same day, and sent a new amendment to them that same day. We waited all day Friday, which was the last day of our inspection/due diligence period, and heard nothing. So we basically had to make a decision about terminating, based on the seller's (and the listing agent's) word. And they had a history of lying. But I wanted to trust them so bad, and figured that they never would've given us that price, knowing we were in the due diligence period, without sticking to their word, since it would now cost us money.
3 days later, after some badgering from our agent, the listing agent said that the seller had approved the $86K, and so did her boss, and she would be signing it off today. Well, today is here, and we just got told that the INVESTOR did not approve it, so we are stuck at $89K! What the?! Seriously? So, now it appears the listing agent is partly at fault because we were NEVER told that we had to wait for investor approval, and we were told that it was approved. This boils my blood that they could be so careless and unethical.
Are we screwed now? I want to back out of this deal. But are they entitled to our earnest money, even though they lied to us? And we had to make an UNinformed decision whether to terminate? Is there really NO ONE that they have to answer to? This is insane and so shady!!! Please, any advice you have is hugely appreciated. I'd like to go see an attorney (I'm in GA), but I don't want to waste his/her time if I'm S%$ out of luck.
Hi @Kelly Bellini . It certainly does appear that this listing agent is either shady or incompetent. That said, your buyer's agent is not entirely blameless either. They are supposed to be safeguarding your interests, and yet they allowed this bad situation to develop.
Who is holding your earnest money? If it's with your agent, you should have ZERO trouble getting your money back.
If it's being held by the listing agent, have your agent demand its return. Otherwise, file a complaint with the Georgia Real Estate Commission. If the listing agent is a Realtor, you can also file an ethics complaint with the Georgia Board of Realtors.
@Kelly Bellini you need to physically go the the listing agent's broker of record and file a complaint immediately against the agent .Tell the broker exactly what happened and see what they say about it.Take you agent with you to explain the run around you have been put to suffer through and threaten legal action if you can't get the deposit money back.Have a lawyer on standby to take over if they try to duck and dodge you.
Hey Mitch I'm sorry to but in on you guys discussion with a dumb question but you said if the listing agent is a realtor... I thought a listing agent was a realtor or am I missing something?
@Mitch Messer --thanks so much for your reply. I feel like the listing agent is mostly incompetent, and that the bank we're dealing with is super shady--I just looked up reviews on them, and it appears they are HORRENDOUS (1.2 stars out of 5, with 40 reviews on one site). My agent has pretty much warned me all along, but let the decision by in our hands. I'm guessing I'm going to be using this one as a huge learning experience. Unfortunately, my agent is not holding the earnest money. The title company/escrow is holding it. My agent is putting in a call to them tomorrow, to get their take. I hope they realize that the sellers have not been acting in good faith. I love the idea of filing the complaint with the Georgia Real Estate Commission. I will check on the Realtor status as well. Thank you! Thank you!!!
@Terrell Marible --I'm pretty new at all of this, but I think the word "realtor" or "Realtor" can be tricky. I think you can use the term "realtor" when referring to any real estate agent, but if you use the term "Realtor" (capitalized), it refers to a real estate agent who belongs to the National Association of Realtors. So basically, by being in that group, they pretty much have to abide by that association's standards. I think.
@Brandon Battle --thank you so much for your reply! Seeing as I am dying to give someone a piece of my mind, in person, I love your idea. I'm definitely going to do this after hearing what the escrow/title company says to my agent tomorrow. I'd love to walk right into the seller's office as well (the bank), but unfortunately, they are in Texas. That's a bit of a drive...
I buy REO properties exclusively and dealing with REO properties can be very frustrating. Banks are in the business of disposing of the property. They're not likely trying to cheat you or play Jedi mind games on you. Incompetent -- often They're not emotional about the property. You will probably not like my advice, but here goes...
There are often multiple levels of players involved -- listing agent, asset manager and the bank. And they're not always humming at peak efficiency or communicating well or in a timely fashion. They frequently miss their own deadlines. I would take some of the emotion that your feeling out of it and tone down the invective a bit-- "lying", "unethical", "shady" etc. Seems like your goal should be to calmly communicate with the listing agent (or their managing broker) and find out the status and either proceed with the deal based on your last agreed upon terms (which you seemed interested in) or to get your escrow released.
Failing that, seek legal advice. Filing complaints with the real estate commission or the local board of Realtors, may make enable you to vent, but they will not make you whole.
The escrow company isn't going to take sides in this dispute. Not sure of Georgia law specifically, but the escrow company will normally hold your deposit until they receive mutual written instruction from the parties or receive a court order.
If they have lied they you are due your earnest monies back no matter what. Just have to prove that they have lied.
@Phil G. --thanks, Phil! Frustrating, indeed. I actually do like your advice. I'm definitely venting here, but I always try to go about things the nice way, first. But deep inside, situations like this can really make my blood boil. I guess it's because it just FEELS like they're trying to take advantage and cheat me. But you're right in that there's a huge lack of efficiency and probably incompetence. I'm glad you were able to spell out for me the different players, because it has been confusing, trying to understand who information is coming from. It seems as though the asset manager keeps approving things, and then down the road, the bank says no. Then, of course, the listing agent admitted to our agent that he had only "scanned over" the email he had received from the asset manager, and that's why information was left out. Talk about inefficient incompetency! I was certainly curious about what part the escrow company takes as far as doling out the money/earnest money. It gives me some relief to know that they need instruction from both parties (I'm reading that right?), or a court order. We're going to start out nicely, calmly, and hopefully, we won't need to go any further. Being new to investing, I know that one of the main things I need to do is delete the emotion that goes with buying and selling :)
@Account Closed --I hope that's true! As far as proving it, I've been wondering if email correspondence counts. It has to nowadays, right?
Absolutely that counts!
In the residential space most of the time boiler plate contracts are used. When you get into large balance commercial contracts you tend to have commercial attorneys redlining a word doc with changes back and forth until a final document is ready to execute for a purchase and sale agreement.
Your real estate agent/broker and the sellers real estate agent/broker are NOT,NOT experts when it comes to legal language. They are not an attorney or legal counsel of any sort.
A REALTOR is simply a word used by NAR for people that belong to their organization. They have a code of Ethics they agree to follow and can be sanctioned by if a potential violation is found. This is COMPLETELY DIFFERENT then the Georgia Real Estate Commission. The GREC you can be licensed as an agent or broker and not be a REALTOR. The NAR, mls's,etc. are considered 3rd parties by the real estate commission. The GREC is interested in license law violations and protecting the interest of the public. License law violation is not the same as an ethics violation.
In GA to file a compliant you simply cannot just call and complain. The GREC has very limited staff when it comes to investigators. The investigators research properly filed complaints and then render findings. Many times the complaint is dismissed or a further hearing is held if the complaint has substantial substance and weight to it.
To file a complaint you have to get notarized and complete certain steps. This is done on purpose so that buyers and sellers,other brokers and agents will not go through the process of filing when they are just being vendictive or venting.
In your contract before earnest money goes hard you could have a reinstatement clause where if the acceptance in writing at XX price is not received by this date then the contract will be terminated with the right to reinstate if A,B,C stipulations are met.
If your earnest money is small and an attorney is hundreds per hour it may not be worth it. My clients are generally buying very larger properties for millions or tens of millions so earnest money is in the hundreds of thousands.
Dealing with REO banks is tough. They are very often unorganized. The listing broker is generally getting low commission and doing volume so their attention to detail tends to not be great ( a volume game for them).
Banks will be unpredictable. You just have to protect yourself in the contract properly to keep them honest and not playing games.
No legal advice given.
Phil is absolutely correct... in addition, while the title company will not release your earnest deposit until mutually signed off upon with instructions for release, the bank will not be able to sell the property to another person until the issue is cleared up because you are technically under contract ... it creates another encumbrance on the title so it's in their best interest to release earnest money back to you and move forward with another buyer. Your agent should be able to get this handled with hopefully just a verbal conversation. Good luck!
@Kelly Bellini you have to have competent people ( realtor,attorney,accountant ) on your team. You can ask BiggerPockets community for recommendations. There are lots of incompetent people, unorganized system (REO banks) out there. I had an attorney who promised me the moon and did not deliver a single thing and that still bothers me until now. Good luck with your real estate journey.
@Phil G. from my experience in Georgia, earnest money has been deposited even while during the inspection period, but it might depend upon the deal in which you are involved and the "players" ie. realtor company, lawyer, etc.