Will I lose the entire downpayment amount if I walked away now?

[Safire]

I have some questions pertaining to closing I need advice on. This is in California.

I insisted on a home inspection on a home, even though it's supposedly "brand new" build by a large and well-known builder. The agent (who was recommended to me by my credit union) has DISAPPEARED ON ME although I get read notices to all the texts I'm sending him. He recommended his "friend" who is a home inspector but the guy has horrific / extremely negative reviews on Yelp. So I went with another inspector who had great reviews and feel did a good job for me. This, I think, pissed the agent off because it was the LAST time I heard from him. This is another issue.

But the main thing is this: The inspector noted a few things to be fixed, and then said he'd re-inspect it once the builder has repaired the problems he identifies in his report. The report and the findings were submitted to the builder on Friday, the 2nd. On Saturday, the builder's agent told his team will fix it but did not give me a specific date by when this would happen. In the meantime, they want me to drop off my downpayment cashier's check by this Friday, the 9th.


1. If I drop off the downpayment check, what is the guarantee the builder will fix the issues noted in the inspection report?

2. Even worse, is this. If I drop off the fat check, and then decided I am not going forward because the issues reported were not fixed or fixed to my satisfaction, the escrow officer for First American Title says that I cannot get *any* money back unless the builder agrees IN WRITING. Yes, apparenty the builder will have agree IN WRITING for me to get my ENTIRE downpayment check of over 250K back, and not just the "earnest money deposit" of 5K! This is really freaking me out! My purchase contract says the "liquidated damages" are 5K. But can the buider keep this HUGE amount if I walked away for any reason once I turn in the downpayment over to escrow company? She instead helpfully suggested that I wire the funds instead of dropping off a cashier's check after the builder has completed the repairs and the re-inspection report is satisfactory!

Can anyone who is familiar with real estate transactions please help me understand this? I am older but this is my first house and we saved this money over 12 freaking years. We could never make this much again because now we're close to retirement age and would be destroyed and unable to rebuild this savings if we lost this amount.

I do have issues with how the real estate has disappared on me but this is even worse and a terrifying amount of money to "lose". Please help!

 

[Letj]

Is this the earnest money deposit? I am not sure what you mean by down payment because usually that’s handled at closing. Does your contract allow you to walkway if inspection is unsatisfactory?

 

[Safire]

Is this the earnest money deposit? I am not sure what you mean by down payment because usually that’s handled at closing. Does your contract allow you to walkway if inspection is unsatisfactory?

No. The 250K+ is my downpayment for the house. My earnest money deposit is only 5K. Since I am paying my downpayment by cashier's check, First American title wants me to give them the check by this Friday to "hold" for 10 additional days (until closing).

The earnest money is "only" 5K. There is no inspection contigency. So I assumed that if I walked away because they haven't fixed the issues noted in the report, I'd be out "only" 5K. However, the escrow officer claims that if I walked away / decided at the very last minute not to proceed, that I could potentially lose the ENTIRE 255K (250K downpayment + the 5K earnest money).

Is this true? Can a builder keep this GINORMOUS amount of money if I chose to walk away? I don't think I will ever buy a house in this lifetime. It's just too stressful and the anxiety will kill me soon.

 

[PaunchyPirate]

What do the terms of your purchase contract say? If there isn’t specific timing on when the fixes must be done in the contract, then the builder isn’t bound. What does the contract say you can do if not satisfied with the inspection. It should all be spelled out in the contract you signed. If it’s not, then the builder can pretty much do what they want. At least in my experience where I have lived. And the contract should also spell out when you can get your money back, if at all.

If you signed the builder’s own contract, it is probably stacked to protect them. Not you.

 

[Jerry1]

I don't know the law but as a rule of thumb, if you hand over money before the work is done to your satisfaction, you take on the risk of it not ever being done and/or not being done to your satisfaction. So, many people will tell you to walk away from the deal unless the builder fixes everything to your satisfaction before you put your money down. This is sound advice, but it ignores that you will have to be willing to walk away from the deal. Along the same lines, why would the builder want to deal with you if the market is robust and he has no worries about getting someone else to buy the house.

So, no matter the legally correct answer, you need to decide how critical the issues are that your inspector identified. You'll have to weigh that with how bad you want the house. As distasteful as it would be, sometimes, it might be better to just fix the issue yourself rather than deal with the builder, who has every incentive to be working on just about anything else but your problem after you buy the house.

And, I can tell you from my daughter's experience, even if the builder puts in writing that he'll fix the issue, that piece of paper will mean nothing to him over starting another job.

Wishing you well with this. It's often very stressful.

 

[Letj]

Consider the items you’re asking to correct. I’ve bought and sold many homes and inevitably I found that first time home buyers are easily spooked by inspection items that wouldn’t phase an experienced buyer or an investor. Are the items so critical that if they’re not done to your satisfaction affect the integrity of the home? Does it make sense for you to ask for a credit and get your own professionals to fix them for you? That’s what I’ve tended to do. It’s really sad that your agent ghosted you because this is the sort of situation a good agent handles without getting the client in the middle. If you walk away from contract, the agent can sue you for their commission, you’ll likely lose your earnest money and may have to pay for the doc preparation and title searches if already done but maybe this may be worth the risk to you if you’re really uncomfortable with proceeding. I highly encourage you to taken to your closing attorney if you want to get out of the contract and let them talk to the builder’s attorney. They should also explain what you could likely be on the hook for.

 

[RetiredHappy]

You should talk to the builder and explain that the agent had disappeared and you needed to address several concerns based on the home inspection before paying the next $250K. Unless it is not a reputable builder, they all want to close on the home and will do the necessary remediations to satisfy the buyer. Some home inspectors are also over zealous, so you will need to figure out what must be fixed vs. "ideals".

 

[FlaGator]

If the builder doesn't, or is unwilling to do the "right thing", all you have is the contract to fall back on. The title company isn't the one making decisions, it's the contract. If you're not comfortable reading and interpreting it, time to get an attorney who can. It's a legal matter now, and hopefully you can work it out on your own.

I have a lot of sympathy for you, and may soon be facing the situation. Other's experiences are a good warning.

 

[Scrapr]

Your "agent" May be a captive agent of the builder. The large National builders put employees in the sales models. they may never say they are independent agents but it is strongly implied. They are not. My clue here is no inspection contingency. every RE agent I have ever worked with designs an out. Sometimes it's inspection, sometimes something else. But I always have a way out of the deal.

I would not give them the 250k. I'd make them sweat. You might be out the $5k. Escrow people typically don't know what is in your contract. They are pushing money from one column to the other*. They need to close deals.

* I exaggerate but only some

 

[Drake3287]

Almost everyone who buys a brand new home has a long laundry list of repairs that are still expected from the builder. I believe in California most if not all home builders also have a 1 year warranty on the house. Unless these repairs are huge big ticket items I'd simply go ahead with the sale and give them ample time to make the final repairs. No builder has a 100% satisfaction rate on new homes. Welcome to the club.

 

[cathy63]

... I highly encourage you to taken to your closing attorney if you want to get out of the contract and let them talk to the builder’s attorney. They should also explain what you could likely be on the hook for.

California home sales don't usually have a closing attorney. The escrow company coordinates everything.

Escrow people typically don't know what is in your contract.

In California, the escrow agents I've used have always been intimately familiar with the contract provisions. RE contracts are on standard forms and they know them inside out.

The agent (who was recommended to me by my credit union) has DISAPPEARED ON ME although I get read notices to all the texts I'm sending him.

Does the agent have a boss or partner? These guys usually do not work alone. Call the agency office directly and ask to speak to whoever's name is on the door, or if that person is already your agent, ask for a different agent. Also, who's paying your agent's commission -- you, or the builder?

Some home inspectors are also over zealous, so you will need to figure out what must be fixed vs. "ideals".

This. Are you sure that every single thing the inspector found needs to be fixed by the builder before closing in order for the home to be habitable? Are these things like toilets don't flush, floors are not level, gutters are not attached; or are they more cosmetic? They are not likely to do cosmetic fixes that involve ripping out significant work. It would have to be something truly non-functional before most builders would do it at this point.

Does the contract include any type of warranty that says they'll fix certain types of issues discovered after the handover for x number of months or years? Would any of the items on the inspection report fall under that warranty?

 

[Safire]

I don't know the law but as a rule of thumb, if you hand over money before the work is done to your satisfaction, you take on the risk of it not ever being done and/or not being done to your satisfaction. So, many people will tell you to walk away from the deal unless the builder fixes everything to your satisfaction before you put your money down. This is sound advice, but it ignores that you will have to be willing to walk away from the deal. Along the same lines, why would the builder want to deal with you if the market is robust and he has no worries about getting someone else to buy the house.

So, no matter the legally correct answer, you need to decide how critical the issues are that your inspector identified. You'll have to weigh that with how bad you want the house. As distasteful as it would be, sometimes, it might be better to just fix the issue yourself rather than deal with the builder, who has every incentive to be working on just about anything else but your problem after you buy the house.

And, I can tell you from my daughter's experience, even if the builder puts in writing that he'll fix the issue, that piece of paper will mean nothing to him over starting another job.

Wishing you well with this. It's often very stressful.

It is INCREDIBLY stressful. Being told I'd lose over 250K knocks me out.

 

[Safire]

California home sales don't usually have a closing attorney. The escrow company coordinates everything.


In California, the escrow agents I've used have always been intimately familiar with the contract provisions. RE contracts are on standard forms and they know them inside out.


Does the agent have a boss or partner? These guys usually do not work alone. Call the agency office directly and ask to speak to whoever's name is on the door, or if that person is already your agent, ask for a different agent. Also, who's paying your agent's commission -- you, or the builder?


This. Are you sure that every single thing the inspector found needs to be fixed by the builder before closing in order for the home to be habitable? Are these things like toilets don't flush, floors are not level, gutters are not attached; or are they more cosmetic? They are not likely to do cosmetic fixes that involve ripping out significant work. It would have to be something truly non-functional before most builders would do it at this point.

Does the contract include any type of warranty that says they'll fix certain types of issues discovered after the handover for x number of months or years? Would any of the items on the inspection report fall under that warranty?

Cathy, can you confirm is a builder in California can keep 250K - the potential buyer's downpayment + earnest money deposit? I mean, I understand they kept the property out of the market for a few weeks but how does that entitle them to anything over earnest money?

Or is the escrow agent messing with my head?

The items are NOT cosmetic. They are open wires (live or not) near the main water control, lack of proper insulation in the attic and a majorly damaged front porch pillar (may not be weight bearing but is unbelievable they thought they could sell it with obviously eye sore damage).

 

[RetiredHappy]

Being a "large well-known builder" tells me that you are overly anxious. Go back and read the responses. The builder will make right on major functional issues. If it is minor cosmetics stuff, they may not get fixed but shouldn't be a deal breaker.

Before closing, there is a walk through. All these items will need to be addressed if they have not already been fixed. Closing will delay until they are fixed.

 

[Safire]

Being a "large well-known builder" tells me that you are overly anxious. Go back and read the responses. The builder will make right on major functional issues. If it is minor cosmetics stuff, they may not get fixed but shouldn't be a deal breaker.

Before closing, there is a walk through. All these items will need to be addressed if they have not already been fixed. Closing will delay until they are fixed.

Already had that "Walk through".

I absolutely agree that I have anxiety issues - I was diagnosed with GAD in my teens and that stuff makes life hard enough. My trigger point was the escrow agent telling me today I'll not get my downpayment of over 250K back without the builder agreeing to it in writing. What on Earth? How are they entitled to 250K for a few weeks of not marketing the property? Is that not what the earnest money deposit is for?

 

[HI Bill]

If your agent is a licensed Realtor, I'd file a complaint with the BBB and the National Association of Realtors, at least after you get what you want.

 

[RetiredHappy]

There should be another walk through before closing. I assume this is a first walk through. The next walk through before closing will show that the items have been fixed other wise closing will be delayed. There maybe some items like the yard is not yet done because of bad weather and they will get it done after closing.

The home inspector will ask to be paid again, maybe a smaller amount, for looking at the same items again before closing.

My son went through all of these as a first time home buyer. I was there during closing to help him through the process. He paid for the home inspector to come out again to ensure that the big items were fixed.

 

[Taco]

Can you give a couple of examples of the items that need to be fixed?

 

[Safire]

Can you give a couple of examples of the items that need to be fixed?

Open / exposed electric wires near the main water supply control area.

Attic insulation inadequate.

Front porch pillar (not sure if it's weight bearing) has gaping holes and the bottom has jagged edges with a large piece missing.

Stucco around the house randomly has holes - some as small as a dime and four about the size of a tennis ball (!!!)

 

[Scrapr]

:"large well-known builder"

doesn't care about quality. just pushing volume out the door. I worked in the residential construction field for 30 years. After a few years of working for some "Nationals" I dropped all of them. Our biggest contractor was a large local that I knew well. At one point they were starting 1 house a day. that's fine when you are doing underfloor on 5/week. If a build take 75-90 days you have that many homes in the pipeline. It is hard enough to build that many and just as hard to do the self inspection. then the City/county inspectors comes through & "calls" some items. So if there is a plumbing "call" the guy doing underfloor has to pull off & go fix his mistake. H/she has to do it in a hurry because he still has an underfloor to finish today. and hope it's not across town.

and sometimes all these add up w plumber/electrical/framer/roofer/etc. Stuff gets missed all the time. So the job site super/project boss needs to close this on Thursday. But the trades can't get to it till next week. So they close & pinky swear they will fix your issue....fast. But they are all busy doing rework & can't get to the warranty work. So the homes in the pipeline get finished & the warranty work sits.

There are ways around all this but it costs money. I would not close until my items are fixed. But i'm mean that way

 

[Safire]

doesn't care about quality. just pushing volume out the door. I worked in the residential construction field for 30 years. After a few years of working for some "Nationals" I dropped all of them. Our biggest contractor was a large local that I knew well. At one point they were starting 1 house a day. that's fine when you are doing underfloor on 5/week. If a build take 75-90 days you have that many homes in the pipeline. It is hard enough to build that many and just as hard to do the self inspection. then the City/county inspectors comes through & "calls" some items. So if there is a plumbing "call" the guy doing underfloor has to pull off & go fix his mistake. H/she has to do it in a hurry because he still has an underfloor to finish today. and hope it's not across town.

and sometimes all these add up w plumber/electrical/framer/roofer/etc. Stuff gets missed all the time. So the job site super/project boss needs to close this on Thursday. But the trades can't get to it till next week. So they close & pinky swear they will fix your issue....fast. But they are all busy doing rework & can't get to the warranty work. So the homes in the pipeline get finished & the warranty work sits.

There are ways around all this but it costs money. I would not close until my items are fixed. But i'm mean that way

Thank you for letting me know I was not being unreasonable. Since I have no inspection contingency, can I insist on these fixes? What wording do I use to force them to prioritize my home repairs first? Thank you!

 

[Texas Proud]

If your agent is a licensed Realtor, I'd file a complaint with the BBB and the National Association of Realtors, at least after you get what you want.

If an agent also go to the state to report them!!!

As other have said, it matters what is being asked... when a friend bought a new house (like 4 decades ago) he had a couple of very short walls that were not straight... complained about them... was told they would be fixed but keep going with the sale... well, they were never fixed... I never did think they were that bad but he did... he was right as they were not straight...

 

[Scrapr]

Thank you for letting me know I was not being unreasonable. Since I have no inspection contingency, can I insist on these fixes? What wording do I use to force them to prioritize my home repairs first? Thank you!

All you can do is slow down the process. that will get their attention. At a few days before closing they either will cave and get your requests done or they won't. If you clog up the arteries they will put you higher in the que for repairs. That is your only hope. I might go by the sales office & find your sales person. Remember if he is on the homebuilder staff he is an employee not a RE agent. He might have a RE license through the builder. He would not be your fiduciary. They the homebuilder needs to close ....and on time.

 

[skipro33]

I admit I didn't read all the replies but there's a new law in California that requires a buyer and a seller to each contract with their own agent. This was because there is an inherent conflict of interest if the same person is representing each of the parties. Id contact your agent and remind him he's about to lose his commission and likely his license is he fails you on your contract with him and that you intend to sue him if this purchase falls through because of his failures.
No way would I hand over the $250k until every single concern you have is answered to your full satisfaction.
Remember; the person who's writing the checks is the boss. Until your needs are met NO ONE GETS PAID!

 

[pb4uski]

OP needs to hire a lawyer to represent him in this transaction and explain his rights and responsibilities.

I know this might be unusual, but given that the OP is new to home buying and under stress, it would be money well spent.