Should i get my earnest money back?

Question

ok...so i try an buy a house, i put up earnest money, i do a house inspection and pest inspection...all good so far.....now the bank goes in and get an apprasial and septic inspection, the apprasial is more than the loan will be for but the septic fails badly..has to be completly replaced before the bank can loan me the money....so the bank bails which means i have to bail also..the contract does state that the buyer should have all inspections done prior of the offer he will make..ok i did that..the septic is from the bank, not me..i asked the seller if they are gonna tell people bout this problem on the next offer and they say yes..now if they would have told me i would not have invested all my time and the banks time in this but at the time i was buying they didnt know bout the bad septic. Jus seems that i made them aware of this and they should refund my earnest money for the major issue i found..i'm not asking the refund for my inspections i paid for..jus the earnest money.

Answer 1

Your logic sounds reasonable, and would make a valid point in a court. If you really like the house, have the owner fix the spec tic system or lower the price to reflect the cost of that. Is there a building code that covers, a functional system which is required by law (for health reasons, regarding transfer of the house ownership) as a way to renegotiate or forcing them to take it off the market or repair prior to selling. Talk to building codes or public health departments to explore your options.

Answer 2

You need to ask your Realtor that question.  But wait you probably thought you were smart enough to do this on your own and buy from a For Sale By Owner right.  Now you see why its best to have a Realtor.  Your earnst money is probably in the sellers bank account now and if its not held in an escrow account the Real Estate laws of your state do not apply to the transaction.  Its going to be up to the seller whether or not you get anything back it sounds like.  

Let me give you some advice.  Call a Realtor and don't try to buy a For Sale By Owner property next time.  This way other people have the liability and risk, not you and someone who has no clue how to sell a house.  My guess is the seller will keep your earnst money though.  Thats what FSBO do.

Answer 3

Well you're certainly NOT entitled to a refund of the inspections you paid for

The current owners may have been unaware of the septic problem

IF you gave seller all appropriate notices within the times specified in your contract, you should be entitled to return of earnest money

Make written request for return of earnest money noting appropriate notices provided (which should all have been in writing also)

Don't you have an attorney representing you?  Get their advice and assistance!  If not, what about a realtor?

Answer 4

Why don't you just do a FHA 203k loan to finance the cost of the new septic system?  If your bank isn't FHA approved, find another.  Talk to the seller and explain your plan.  Also, tell them that if they don't agree to it, they will have to re-market the house and the next buyer is going to have the same issue.  If they have any common sense, they will agree to extend the contract's settlement date and you can proceed with a renovation loan.  If the septic system can be done for under $25,000, you will probably qualify for a "Streamline 203k" loan which only requires you to get an estimate from a licensed contractor.  If you need a little help with this, I can answer questions.  Email me on my profile and put Septic in the subject line so I know what its about.