get deposit on house back

July 8, 2011 3:01 PM

Are we entitled to our deposit for a house we put an offer on but canceled the sale due to the electrical wiring?

My wife and I recently put an offer on a house in California. Once the offer was accepted we put a good faith deposit of around $11,000 into escrow(3% of sale price). We then proceeded with a general home inspection. During the home inspection the home inspector found that the electrical wiring in the house contained copper and aluminum wiring as well as the old cloth type of wiring. It also had the Older 2 prong non grounded type of outlets at various areas. Basically the wiring was old, out of date, and possibly a safety hazard. It was Recommend to have a complete system evaluation and upgrade if needed by a qualified electrician. We then had a qualified electrician come to look at the house. He told us that the current wiring is basically a safety hazard, wasn't set up to code, and wasn't permitted. He recommended that we rewire the house which would cost about $8,000. We also got an over the phone quote of about $10,000 from another electrician. We then preceded to get a credit for the repairs from the seller. They were only willing to give us
$2,000. Since my wife and I don't want(and really can't afford) to spend an additional $6,000 or higher in repairs for our first house we decided to cancel the sale. We didn't want to live an unsafe house and we didn't want to pay to have it fixed. The cancellation paperwork was sent in within the 17 day contingency period. We then signed the paperwork with escrow to release the deposit. However, in order for us to get our deposit back the seller must sign the paperwork from Escrow releasing the deposit back to us. The problem is, the seller is refusing to sign. They say we don't have a legitimate reason to back out of the sale. Our real estate agent is baffled. He says the first 17 day contingency period is put into place so that the buyer can do their investigations of the house before moving forward. If something is found during the investigation that isn't satisfactory to the buyer, they are legally within their right to back out and get their full deposit back. As of now, we may have to get a lawyer and go into mediation. Any thoughts here? Are we clearly entitled to our depost? Or does the seller have a case? Any help here is very much appreciated!

posted by ljs30 to work & money (13 answers total)

You should get a lawyer involved, since eventually you'll want a lawyer when your house purchase does go through. A real estate lawyer should be able to untangle this mess and save you from future messes.

Good luck!
posted by achmorrison at 3:07 PM on July 8, 2011 [1 favorite]

Yep. Lawyer. One letter should do for an idjit like this.

Odds are they knew about their crap wiring.
posted by Mister Fabulous at 3:09 PM on July 8, 2011

Also ask your bank if they would refuse to give you a mortgage for a house that is an uninsurable safety hazard. Then you can say, Gee, I'd love to go forward, but the bank won't give us a loan for that house.
Should lend more weight to the fact that you're not backing out for frivilous reasons.
posted by Knowyournuts at 3:13 PM on July 8, 2011

Was the wiring mentioned on the seller's disclosure? That's the only justification I can think of for their intransigence.
posted by adamrice at 3:19 PM on July 8, 2011

Lawyer of course. But if the inspection did not pass because electric not up to code then bank would be remiss if it gave you loan and you seem to be within rights to back out unless the paid for bringing the electric up to code.
posted by Postroad at 3:36 PM on July 8, 2011

The whole point of contingencies in a contract is to pull out due to a failure to meet those contingencies. (ie its contingent upon inspection)

You are fully entitled to your deposit back though it may require an attorney to do so.
posted by bitdamaged at 4:09 PM on July 8, 2011

Not only that but your attorney's fees should be covered - and they might even work on a contingency (doh!) basis. This guys behavior is egregious.
posted by bitdamaged at 4:10 PM on July 8, 2011

Obviously, you need a lawyer, but I wonder what you mean by "contingency period." Did the offer include the phrase "...contingent upon Buyer obtaining and approving an inspection of the property?" If the contingency is not spelled out, specifically, you may have a problem. If this is the case, you may want that lawyer to look at the agent's liability for not properly writing up the offer.
posted by Old Geezer at 6:14 PM on July 8, 2011

Lawyer up.
posted by J. Wilson at 6:21 PM on July 8, 2011

IANAL. You need a lawyer. When you offered to buy the house, and put down money, there was a contract. If it says the sale is contingent on successful inspection, then you win. Your realtor may have the name of a knowledgeable real estate lawyer. Usually the real estate company holds the money, for this exact reason. If there is no contingency clause, your realtor has some explaining to do, and might be liable. IANAL You need a lawyer.
posted by theora55 at 6:42 PM on July 8, 2011

Get a lawyer. Hopefully, this won't take more than a strongly worded letter. The earnest money you put up was only to show you were serious about buying. That the inspection revealed the house to be dangerous is not your problem.
posted by Gilbert at 8:44 PM on July 8, 2011

For future reference: this is why I always put "subject to passing inspection" language in all offers. What consititutes "passing" is largely up to me.

When you speak to your attorney, ask for a one-sentence clause to use next time.
posted by trinity8-director at 10:02 AM on July 9, 2011

Our real estate agent is baffled. He says the first 17 day contingency period is put into place so that the buyer can do their investigations of the house before moving forward. If something is found during the investigation that isn't satisfactory to the buyer, they are legally within their right to back out and get their full deposit back. As of now, we may have to get a lawyer and go into mediation. Any thoughts here? Are we clearly entitled to our depost? Or does the seller have a case?

I'm not a lawyer, and real estate law differs pretty significantly from place to place. But I've bought a house, and yeah, that's exactly what the contingency period for the inspection was for.

Doesn't the seller have an agent? In a situation like yours, our realtor (backed by her company) would've put pressure on the seller's realtor and worked to resolve this before expecting us to hire an outside lawyer.

(It's not common in PA for buyers to have their own lawyer at the sale.)
posted by desuetude at 12:20 PM on July 9, 2011