Seller will not return earnest money?

Question

I signed a P & S on a condo back in June of this year. Since I'm a veteran & didn't have enough for a downpayment. I decided to use a VA loan. The condo wasn't on the list of VA approved complexes. My lender said that they could get a VA spot approval. The orginal closing date was 08/01. We had to get an extension for the mortgage commitment until 08/07 & closing was 08/15. I received a mortgage commitment from the lender before the 7th. But on 08/12 the VA rejected the condo for a VA loan. I signed a release to get back my deposit, but the seller says that I received a mortgage commitment so I'm not getting back the money. On the mortgage commitment it has a contigence that the VA has to approve the condo. Is the seller legally bound to return the deposit?

Answer 1

No, the seller is not obligated to return your deposit.  The only contingencies which count are those within the P&S.  That the mortgage commitment has a contingency does not transfer said contingency to the P&S.

Another hard luck lesson to be learned in real estate. Consider yourself fortunate that the ONLY thing you are losing is your earnest money.  If you fulfilled your mortgage contingency on the P&S by obtaining a commitment, you COULD be sued for damages by the seller, as well as for specific performance.

Answer 2

Yes because you can't obtain financing!