So here's the scenario:

• Sister is going through a divorce and doesn't make a lot of money.
• Mom agreed to help her out ($200K-$300K) with the purchase of a townhome.
• Mom has ~ $1M in the bank for retirement, so I didn't have concerns.
• After all the upgrades, sister's new townhome comes out to $400K.
• Mom's retirement is dependent extra $ that her money is invested in (CDs, IRA, etc.).
• I hold her that was too much and she should find something previously owned $200K-$300K.
• Sister already gave $20K earnest money and told them she would pay cash (no financing/loan).
• Proof of funding was pictures of screen on Mom's retirement accounts showing money.
• Sister informed builder she didn't actually have the funds to cover the house.
• Builder refused to return earnest money even though she was within 20 days of contingency period.
• Builder stated refusal was due to her showing there were sufficient funds.

Should the builder refund the earnest money and just playing hard ball?

Why doesn't she want the home anymore?
Could she not finance the remaining 100k?

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Did she have a buyer's agent helping her out with this?

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I don't think so. She just had a lawyer look over the contract. This was obviously when she still thought my mom was funding $400K.

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Could she not finance the remaining 100k?

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Already went down that route. Between property taxes and homeowners insurance, she could not make payments on the house even if only $100,000 was financed.

Is she going to be able to find somewhere reasonable to live for that amount?

When is/was the close date? Definitely be looking to see if they have less expensive inventory that they transition her to instead.

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Is she going to be able to find somewhere reasonable to live for that amount?

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She found a townhouse for $265K.

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Do they have any product at a lower price range that she could apply the money towards?

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No. They don't have any other developments within 50 miles. This unit she was looking at was the "starting at" model.

PlanoAg98 said:

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Is she going to be able to find somewhere reasonable to live for that amount?

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She found a townhouse for $265K.

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Ah, I see.. I was like good luck finding a decent rental for less than what that mortgage would be on 100k.

However, it sounds like the townhouse she found will actually cost her 285k. She satisfied the contingency by showing proof of funds. Finding something cheaper elsewhere isn't a reason to get your earnest money back.

Who's the builder? Some of them have multiple lines so that's worth digging into.

Otherwise, it sounds like she's probably stuck, unless the builder wants to show some mercy.

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She satisfied the contingency by showing proof of funds.

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Is it proof of funds if it's not your funds and you don't have permission/approval to use those funds?

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Who's the builder? Some of them have multiple lines so that's worth digging into.

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M/I Homes

I could not find any other lines via Google.

How pissed is your mom?

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However, based on how you are writing it, it appears that the contingency period is over so makes things more interesting/complicated.

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She was within the contingency period when she requested the earnest money back and to terminate the contract.

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How pissed is your mom?

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My mom doesn't know how her retirement savings works. That's what I control and why I told me sister to find another house. $280K (assuming she doesn't get the earnest money back) is much less of a hit on my mom's retirement than $400K. My mom is just glad she saving $120K.

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Not to sound like a broken record here, but you need to read the contract.

Was the "contingency period" to obtain financing?

Because if she stated she would paying cash and showed proof of funds, that would waive the contingency, as financing no longer needed.

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I think this is the "nail in the coffin" response.

Finance Contingency. Purchaser agrees that M/I shall not execute this Purchase Contract until Purchaser provides to M/I a mortgage loan prequalification letter provided to Purchaser by M/I's affiliated mortgage lender, M/I Financial, LLC. However, Purchaser understands and acknowledges that Purchaser is under no obligation to actually obtain a mortgage loan from M/I Financial, LLC. The obligations of Purchaser under the Agreement are contingent upon Purchaser obtaining a mortgage loan commitment from an institutional mortgage lender of Purchaser's choice with an interest rate and other terms and conditions acceptable to Purchaser ("Finance Contingency") within twenty (20) days after the Effective Date ("Contingency Period"). Purchaser agrees to apply for a loan within five (5) Business Days following the Effective Date. If Purchaser is unable to obtain a loan commitment for an acceptable loan program prior to expiration of the Contingency Period, Purchaser shall have the right, at Purchaser's option, prior to the expiration of the Contingency Period, to terminate the Agreement by giving M/I written notice of such termination in accordance with 14(i) of this Purchase Contract in which event the Deposit shall be returned to Purchaser and the parties shall have no further rights, obligations, liabilities or remedies under the Agreement (except as set forth in 14(g) of this Purchase Contract). If Purchaser does not give M/I such notice on or before expiration of the Contingency Period, then Purchaser shall be deemed to have satisfied and/or waived the Finance Contingency. Purchaser acknowledges that the Finance Contingency shall be deemed satisfied if Purchaser locks an interest

rate with M/I Financial, LLC ("MIF"), and, within the Contingency Period, MIF provides Purchaser with a loan commitment at such interest rate. Purchaser further acknowledges that after the Contingency Period, Purchaser's obligations under this Agreement are not conditioned upon an appraiser's or mortgage company's determination of a minimum value of the Property, except in the case of an FHA, VA or USDA loan. It is Purchaser's sole responsibility to comply with all terms and conditions of the loan commitment

14i. Notices. Any notice given pursuant to 2, 5, 9(b), 10 or 11 of this Purchase Contract shall be in writing and shall be given to M/I (addressed to the attention of the Area President and VP Sales and Marketing) by fax (630-883-0944) or overnight delivery to the following address: 2135 City Gate Lane, Suite 620, Naperville, IL 60563. Any such notice shall be deemed to have been given upon receipt by M/I.

PlanoAg98 said:

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However, based on how you are writing it, it appears that the contingency period is over so makes things more interesting/complicated.

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She was within the contingency period when she requested the earnest money back and to terminate the contract.

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I understand that. But it would have also been the time to be more aggressive in painting the actual financial picture to get builder to release EM. In the end, your sister, if she was lone party on the contract, never had the financial wherewithal to make the purchase so insufficient funds could have been proven within contingency period. If it was a mere screenshot of bank account dollars with no name of anybody then that is hardly acceptable as proof of funds. Now if it was a screenshot with your mom's name on it somewhere, then, for me to accept it, the mom would have needed to be a party on the contract. Painting that picture like this is what I am referring to as more aggressive and the time to do it would have been in contingency period.

However, since the request to release EM was done within contingency period, that provides somewhat of an 'out' to still lawyer up and approach it like that.

The contingency is due by date.. not a "you can do whatever you want within 20 days date"

The builder started building your sister a home in good faith, they believed she had obtained the access to proof of funds in good faith, and now that your sister doesn't have your approval to buy this home, y'all are trying to figure out how to get out of it. Understandable, since 20k is a whole lot of money.. but building a house costs more than that.

I don't think you will get the earnest money refunded.

Read the OP. It's a townhome. The home was going to be built spec.

Thanks for posting.

Did she have to sign anything waiving her financing contingency when she stated it was a cash deal?

I would imagine they have some form, or portion of the contract, that contemplates the builder/purchaser rights in the cases where financing is not needed.

That's not exactly true. She clearly spent money in the design center on upgrades, so it's built to her taste. For the sales consultant's sake, I hope she has good taste.

Seems like the paragraph posted requires pre approval from their in house lender. If that was not done then that could be an out as well. Does not seem like contract gives grounds for a waiver of financing contingency period if 'proof of funds' was provided, unless that waiver is stated elsewhere in contract or in special provisions for this specific deal.

nah. that makes it worse because she would be in default of the loan application deadline.

I don't think selections will come into play within first 20 days of the build. And based on how it was written, it seems like this is a pre-construction sale or very close to it so not really a factor.

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That's not exactly true. She clearly spent money in the design center on upgrades, so it's built to her taste. For the sales consultant's sake, I hope she has good taste.

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The house was not going to be ready until around 12/1. She signed the contract on 10/3 and requested it terminated on 10/20. The house was still at the insultation/drywall stage around the time of the request for termination.

This is a good point.

Even in the absense of the contignecy waiver, the purchaser didn't perform under the terms of the contract. Unless she did apply for financing, she would have needed to terminate prior to the five days.

Purchaser agrees to apply for a loan within five (5) Business Days following the Effective Date

Still two sides to the coin within the contingency period. And purchaser gave notice within the contingency period that the 'financing' they had lined up fell through and was no longer an available option. That was their "loan" and it did not end up getting approved therefore they could not move forward with the purchase, hence their release of EM request.

Your scenario ignores the specific lender related requirements for approval that are laid out in those clauses.

Again, we don't have the whole contract, and I would be surprised if there were no mention of what the obligations are for cash offers, so we're all just speculating.

Would definitely be a good idea to have a RE attorney review the complete contract.