Bank Demands Buyer Non-Refundable EM Forfeited to the Bank
Et tu, Brute?
Well, the banks are now taking a lesson from all the Realtors who have been asking for non-refundable deposits from short sale buyers.
One Realtor had the language that if the buyer defaults and the earnest money is forfeited it goes to the sellers Broker to pay for work performed (not to the seller).
Today I received an email from the listing agent with a form from the bank (actually a Credit Union). The credit union demands the earnest money to be changed to non-refundable for 90 days from Feb 18. Our contract was signed on Jan 18, so that makes 124 days that my buyers money could be tied up, IF they agree.
The bank form states if that form is not executed, that they will NOT proceed with the short sale. It further states that if the buyer forfeits the earnest money, that the money goes to the Credit Union to apply toward the mortgage balance.
They also want the buyers agent to sign "agreeing" to the terms of that agreement.
What's next? Well if the buyers and agents give in to these demands then you can expect all the banks to start doing it.
But if the buyers agents have balls and say that they are not going to sign an agreement because they are not a party to the transaction, then maybe the banks will back off.
I'm not a party to the transaction so I cannot sign that I agree to the terms; and I won't.
What will you do when you get one of these?
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The bank wants you to sign so that you can be included in any future litigation.
I agree that you should not sign this.
I also believe that buyers should not sign purchase agreements that specify the amount of commisions that the agents will be getting. Buyers are not a party to commission agreements between the Realtors.
It amounts to the credit union playing big bully. It isn't an amendment to the contract, yet it amends the contract, therefore, I can't sign it, and won't.
I have not received one of those addendums but if I did, I would not sign.
The mortgage company is the 2nd lien holder.
I sent a letter to the listing agent (who is doing a good job) explaining why my clients won't sign and why I cannot sign. We requested the form be sent to the 1st lien holder with my explanation so the 1st can know what's going on.
I'm fairly certain that the 1st lien holder won't be too happy that the 2nd lien holder is trying to get any forfeited earnest money, when it (if any) should go to the 1st.