House vandalized day before closing. Earnest money?

Question

Met with my realtor today to do a final walk thru before closing on a fannie mae foreclosure tomorrow. To our dismay, house has been vandalized with spray paint of gang signs on the interior walls and the back door kicked in. I asked the realtor could I get earnest money back(1000) under these conditions and she said no. 
Anybody got any advice? I would like to try and contact fannie mae directly and plead my case.

Ryan Pyle · Answer

I've had this happen often and I always get a discount out of it. I make the argument that if i don't close then they are going to have to put it back on the market and the next guy is going to want the same discount that I do. The seller's agent most likely does a decent volume of Fannie properties and is used to this ahppening and knows how to approach the seller.

Jon Holdman · Answer

If this was an FHA house I would agree with your realtor.  But with a Fannie Mae, like any other REO, the seller should be able to deliver it to you in the same condition as when you agreed to the deal.  Your agent should contact the listing agent and see what they want to do.  They should be willing to drop the price.  However, that will probably mean a new contract and may take some time to be approved.  So, depending on the damage, you may decide its not worth the hassle.  I had this happen where part of a chain link fence was stolen just before closing.  In the end, I decided to close.  But it depends on what you were planning to do and the extent of the damage.  You need to insist your agent contact the listing agent ASAP if you think the deal has to change.

J Scott · Answer

Here's the situation you may face with FNMA...this is based on similar experiences we've had with FNMA and discussions we've had with our attorney (that said, this isn't legal advice and your experience may be completely different)...

The addendum you signed to the contract basically said that you're responsible to close the property under pretty much any circumstances, including these.  That said, it's unclear if that interpretation of the contract would hold up in court.

Unfortunately, if FNMA refuses to agree to refund the EM, you're only two options are:

1. Go to closing;
2. Don't close and hope to win your money back either directly from the broker or in court.

As for #2, it's less likely you'll get the EM from the broker given that the broker also represents the seller (another reason to have your agent agent/broker when buying!!!).  And if the broker refuses to return the EM to you, you'll have to spend a lot more in attorney fees than you're going to get back to take this to court.

Unfortunately, with FNMA, if they decide not to be reasonable, it's a no-win situation, unless you're willing to spend a lot of money to get back a little.

I would request a price reduction and hope they agree...

Kevin Torrence · Answer

Hi Rob, Let me guess the seller got over exuberant on the carton of smokes you gave him and burned his house down. Didn't he get the message - Smoking can be hazardous to your wealth.

Rob Gillespie · Answer

Kevin,
I had a home I was gonna close all cash a few years ago, and something told me to drive by on the way to the title company.

IT BURNED DOWN THAT MORNING!! I am so freakin happy I did not close.

Of course all I gave the guy for a down paymenent was a carton of smokes! LOL!

You should get the property in the same condition it was in when you signed. If the realtor is a bone bag, call the broker! good luck!! :mrgreen:

Kevin Torrence · Answer

Hi Kathy, unfortunately I didn't interview the neighbors until after the vandalism. But thankfully, I got a second chance before going to closing. You're right, you can learn a lot from knocking on the neighbors door. This lady nearly talked my ears off about her neighborhood.

Kathy V. · Answer

You did your due diligence...asked the neighbors!! Isn't it amazing what you can find out, if you ask?!

Keep on your agent. Sounds like she doesn't want to lose the bonus...I could be wrong but maybe this isn't the property for you. Drugs and all....

Kevin Torrence · Answer

Thanks for the response guys. My agent is also the listing agent. She said she will contact fannie mae tomorrow to see if they will refund the earnest money but she doesnt think they will. Fannie mae is also paying a bonus to her for also being both the listing and buying agent. I think she has her chickens counted before the eggs hatch. I also knocked on the next door neighbors house to see if they heard or saw anything and she let loose how the house was a dope house. The police kicked in the front door and arrested the previous owner. Needless to say I now will interview neighbors before I offer on anymore vacant homes. I also just reviewed my contract and paragraph 23. Risk of Loss, states I have the option to terminate contract due to vandalism and receive my earnest money back, so I will be more demanding tomorrow morning.

Bill Patterson · Answer

Good advice from Jon.  I would also give an estimated cost of the damages along with pictures.  Now is the time to negotiate, since you are a ready and committed buyer.
Bill

House vandalized day before closing. Earnest money?

Most Popular Reply