Earnest Money Disputes


   …… Changes to the Nevada residential real property disclosure.  Effective October 1, 2011 the Seller’s Real Property Disclosure Form, also known as the S.R.P.D. can longer be waived. This form must be provided in just about every residential transaction in Nevada.  There are some exceptions, see below.

    …… The statute controlling this form (NRS 113) was modified within Senate Bill 314 in the July 2011 Nevada Legislative Session removing the section that allowed a seller and buyer to mutually agree that the SRPD would not be provided. Such a waiver had to be signed before a notary by a buyer.  The Law can be found here NRS 113

  …… This will affect many sales such as probate, short sales, and bank owned (REO). Exceptions are foreclosure (when the trustee sale occurs, not a bank selling after they have already foreclosed) between co-owners and new home. All sellers in Nevada must now provide this form. Some sellers have not lived in, or even seen these properties, but the statute is clear, it must still be filled out. If a Seller does not provide the form, a buyer may cancel, without penalty.

…… This should not affect the August 7, 2007 entry on disclosure – New Clarification of Real Estate Disclosure Laws in Nevada.  Remember in that case (the Nelson Case), the Nevada Supreme Court ruled on the scenario where a defect, now repaired, was not disclosed on the Nevada SRPD – “Once the [damage] was repaired … it no longer constituted a condition
that materially lessened the value or use of the [home. Accordingly, [the Seller] did not have a duty to disclose the …. damage.” This rule would still apply.

This is a series of Disclosure Entries see also:

An Updated All Inclusive & Belt Way Disclosure

The New, Improved All Inclusive Disclosure

Nevada Condominium Hotel Disclosure

Nevada S.R.P.D. New Clarification of Real Estate Disclosure  Laws in Nevada

Any questions, you can call me Darren Welsh 702 245 1787.

This is continuation of my FHA blogs.  Please visit the first installation on Flipping Rules , my follow up to Flipping Rules and also my blog on FHA Fees.

Can the earnest money on an FHA loan purchase be forfeited?  Yes, but not often.  If the buyer’s loan is denied, then the earnest money deposit is to be returned.  Your buyers must be careful, just because they are doing a federal insurance loan (FHA), doesn’t mean they are bullet proof in receiving their earnset money back.  If a buyer elects to cancel the transaction without reliance on a contingency and/or has already rendered his/her/their earnest money deposit nonrefundable and again the loan is not denied, the earnest money can be forfeited, even on an FHA loan.

From the, “100 Questions & Answers About Buying A New Home,” we find question number 31

“31. WHAT IS EARNEST MONEY? HOW MUCH SHOULD I SET ASIDE?

Earnest money is money put down to demonstrate your seriousness about buying a home. It must be substantial enough to demonstrate good faith and is usually between 1-5% of the purchase price (though the amount can vary with local customs and conditions). If your offer is accepted, the earnest money becomes part of your down payment or closing costs. If the offer is rejected, your money is returned to you. If you back out of a deal, you may forfeit the entire amount.”

HUD Home Purchases – this blog is NOT addressing HUD Home Purchases and (homes owned by HUD and sold through HUD) and how HUD earnest money forfeiture  is dealt with in those sales, also known as HUD-9548 sales.

You might have also seen this type of language:  “buyer shall not be obligated to complete the purchase of the property … or to incur any penalty by forfeiture of earnest money … unless the seller delivers … a written statement issued by the Federal Housing Commissioner setting forth the appraised value of the property …”  Don’t be confused by this form HUD 92900-A;  it is all part of the loan package as created by the loan officer procuring the FHA loan and does not give the buyer a right to an earnest money refund unless, again, the buyer did not qualify for the loan or the loan could not be issued.

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