Thread: Loan Assumption Denied; Earnest Money Cannot Be Returned to Me?

Hello All

I have an interesting situtaion that I would definitely appreciate some feedback on, so thank you in advance for reading my novel of a story, haha. I've been having the hardest time finding answers anywhere else.

I was looking to buy a home in North Carolina, and I had two pre-approvals from different banks so I could start searching for a home. I finally had made a choice on a home, and surprisingly this was actually a loan assumption. It seemed like a great deal to me. The owners already had 10 years paid on the loan, I didn't have to make a down payment or pay steep closing costs, and the process itself just seemed much easier. I only had to pay $500 as earnest money. However, I was denied the loan assumption. According to the underwriter, my debt to income ratio was too high for their particular bank. Even though I had already received pre-approvals from other banks, they didn't take that into consideration and just told me that they're a lot more strict.

I told my realtor, who then began to get angry, and contacted the underwriter to see if there was anything I could do to get this approved. After it was apparant that I definitely couldn't do the assumption, my realtor went ahead and contacted one of the banks I got my pre-approval from (and contacted the sellers to let them know the change in plans), so I could buy the house with a new loan. I never agreed to that. Here's where everything begins to fall apart.

I emailed my realtor only a day or two after my assumption was denied and told him I was no longer interested in this property. I made it very clear in my email that I did NOT want to pursue going the route of obtaining a new loan. I signed a contract to ASSUME the loan, and since their bank would not approve me, I no longer wanted to purchase that property because I was DENIED. After that email I did not receive a response from my realtor. After not hearing from him, I figured it was a done deal. About a week later I receive a phone call from him, but I was unable to answer, and unfortunately I had forgotten to call him back. A week after the phone call that I missed, he called me again. He was very upset with me, saying I was not cooperating, and told me that he had some people for me to contact about purchasing the home with a new loan. I told him over the phone that I didn't want to go through with it. I was surprised he didn't already know from the email I sent him. During the phone call I did not mention the email I sent him a couple weeks ago. Ugh, I wish I had.

My realtor told me that since I waited too long contact him about the fact that I no longer wanted to go through with this purchase, that I could not get my $500 back. He said that according to due diligence laws that legally I was unable to get my $500. The sellers were the ones who got to keep my earnest money. This is where I get extremely confused. I signed a contract to assume the loan. In my contract, $0 is written next to the due diligence fee, and $500 is written next to the earnest money. I thought that the earnest money should have been given back to me. I was ready to close on that house. I wanted it, but their bank would not approve me. How is it that the sellers get to keep my money? My realtor kept mentioning the time frame in which I told him that I did not want to purchase the home any more. He stated that since I waited too long to let anyone know, that I could not keep the money. The email I sent him though, was only a couple days after I found out the assumption was denied. (I have mentioned this email to him now, and gave him the exact date I sent it. Now he changed his story saying that because the loan assumption was denied AFTER the due diligence time frame, that I was unable to get my earnest money returned to me.)

This actually all took place back in May this year, and this is STILL an issue. My realtor keeps calling me to sign some paperwork, but by signing, I'm thinking that means I agree to give up my $500. I refuse to sign something that I do not agree to.

Here is something my realtor emailed me that might explain this a little better:
"Unfortunately, and to everyone's surpise, the bank declined your request to assume the present mortgage on the property after the due diligence period. Therefore all the monies are released to the seller for taking the home off the market during the due diligence period."

My main questions are:

1. Is my realtor correct when he says that due diligence money comes into play with earnest money?
2. Am I obligated to sign any paperwork at this point?
3. What would my next step be in getting my $500 back (if, in fact, my realtor is wrong in this case)?

I'm really just looking for a second opinion to see if indeed my realtor is right. If this is the law, then it is very upsetting to me that not only did I not get to purchase the house because a bank denied me, but I also don't get the money back that I put down towards the home.