Earnest Money Return Texas

[Vivek A.]

I needed some helps here from the Guru's in Texas.

I constructed a house and listed it for sale, received an offer along with the pre-qualification letter. The amount on the letter was higher than the sales price of the house. 2 days before closing (within the 25 days of backing out incase of financing not being approved) the buyers agent came back and canceled the contract, and provided a letter from the lender which stated 2 reasons for financing falling apart. 

1) Insufficient income for amount of credit requested

2) Excessive obligations in relation to income

The buyers agent also told my agent that apparently the buyers had purchased a car 3 months before they went in for qualification and the lender didn't find that account in their credit report and thus provided the pre-qual letter. 

The excessive obligations in relation to income - the buyers agent also confirmed that no accounts or loans were taken during the period of 23rd July (pre-qual letter date) and 21st August (Denial Letter date). 

As a seller - i sent a demand letter to the title company for the Earnest Money and the buyer objected to that saying that they were within the 25 days period and that the seller doesn't have any legal grounds to not release the Earnest money.

The title company contacted my agent and told her to ask me what I plan to do next?

Do I as a seller have any option at this point, or do I have no choice but to sign the letter and release the earnest money to the buyer?

I clearly feel that this was probably a change of heart but do I have any options at this point? I am not very well versed with the Texas real estate laws. Please advise!

[Wayne Brooks]

Sorry, but it’s quite simple......the buyer was denied financing (doesn’t matter why) and notified you within the required period....as per the contract you have to return their EM.  What part of that are you not understanding?

BTW, this is why many competent agents require a potential buyer to preapproved with Their lender, I know I did.....they know their lender will do a Complete preapproval process (tax returns, W-2’s, bank statements, etc).  There are Lots of lenders out there putting out garbage preapprovals...I guess they’re afraid the potential borrower will complain about all the “extra” documentation.