Recovered Buyers’ $25k Deposit From Deceitful Home Builder

Buying property is one of the most important decisions you will ever make. The process is intensive, requiring enormous time and attention to the contractual fine print. 

Home builders should reward prospective buyers for their due diligence. Unfortunately, that doesn’t always happen.  

In this case, our clients were the prospective buyers. They signed a contract to purchase a model home from a home builder contingent on their loan approval. Our clients paid a $25,000 deposit to demonstrate their commitment to the purchase, provided their mortgage terms and conditions were reasonable. 

While the lender approved our clients’ mortgage, the terms and conditions were unreasonable. 

Specifically, the approval letter stated that our clients had to provide the lender with evidence that one of their revenue streams could generate more income than was feasible to pay off the loan. 

This condition became a sticking point for our clients, who spent weeks diligently crunching the numbers, making every possible attempt to salvage the agreement before the loan contingency expired.

There was no getting around it: Based on the conditions set forth by the lender, our clients could not, in good conscience, move forward with buying the home. 

Our clients issued the home builder a notice to terminate their purchase agreement. They expressed concern about the loan’s terms and kindly requested their $25,000 deposit back. To our client’s surprise, the home builder ignored the terms outlined in the signed purchase agreement and terminated the contract without reissuing the refund. 

Soon after contacting Robinson & Henry, our real estate litigation attorneys issued the home builder a demand letter outlining how the facts would work against them in court. We used case precedent to argue that keeping the deposit would constitute a penalty if the liquidated damages were scrutinized before a court. Such scrutiny would make the contract unenforceable. We also argued that the home builder would not suffer a loss by returning the deposit since they could sell the property to another buyer and retaining the deposit was an unreasonable punishment.

In turn, the company met our demand. Our clients received their initial $25,000 deposit, enabling them to put this chapter behind them and look for a home and mortgage better suited to their needs.