Builder (LGI Homes) will not refund $5000 security deposit

[Kush Khandelwal]

I was in contract to buy a SFR property in Charlotte, North Carolina and had paid a $5K earnest money deposit. This was back in February 2021. Now sometime in June, I heard from their agent that the SFR was nearing completion and they wanted to close end of July. I wrote back saying that I wanted to push out the closing by 1-2 weeks as I needed to buy this property as a 1031 exchange and my sale was also closing around the same time, July 29th to be precise.

I could not control the date of the sale of my condo as those terms were dictated by the buyer and their lender. Hence I reached out to the seller, LGI Homes, to have 1-2 weeks buffer in case my condo sale was delayed. I needed the money from my sale to pay the builder. 

On July 1, LGI Homes agreed then to move their closing date to the first week of August (all this via email). I breathed relief that we won't be cutting this too close. 

However, then I heard from them again mid July and they set the closing to July 29th, the same exact date as my selling condo! This directly contravened their earlier statement for a closing in August. They just would not budge after that. 

Best case, it could have worked out, however unfortunately, my sale condo had some last minute hiccups and it didn't close until August 6th, one week late. 

I didn't have the cash to pay LGI Homes on July 29th, the day of closing. I asked them to wait just a few days but they wouldn't listen. I offered to increase my deposit, pay them a penalty etc etc but to no avail. 

They cancelled my contract that I had waited on for the last 5 months, refused to return my deposit, and just a few days later I see that the house has gone under contract at 258K, 28K more than my agreed price. They turned around and put the home immediately back in the market. 

As a result, I'm 33K in the hole. 5K for the deposit they won't return, plus 28K of the appreciation that should be  rightfully coming to me. 

Do I have any legal remedy here?

Oh, and I bought this property through RWN (Real Wealth Network). They are not being very helpful. 

[Al D.]

@Kush Khandelwal There are some information gaps that I can guess about, but would also like to ask some questions for clarification:

I am guessing that the date for completion of construction/closing was an estimate, but with a stipulation in favor of the builder/seller that they could push it back. I am also guessing that the original contract had no provision for you to be able to push back the closing date. (However: some states allow the parties a one-time - unilateral - extension by X number of days, but only for specific reasons. I don’t know whether NC may have this option, but this could be worth looking into - this should be in the contract.)

When you signed the February purchase contract - and during the subsequent months - did you put in any financing contingencies, such as the sale of your condo has to take place first? From what you’ve said so far, it does not sound like you did.

Did you have any contingencies, at all, in the original contract? I doubt that you can get the ownership at this stage, but this may help you to get your earnest deposit back. Some terms regarding this should be in the original contract, while additional rules may also apply by state law. (Frankly, regardless of whose side the law may favor in your situation - assuming no apparent dishonesty on your part in the process - I’d expect the seller to give you back this money in good faith, if for no other reason than for being a member of RWN, with whose many more members they’d like to do much more business in the future.)

The next question boils down to whether your July email discussions could be considered a contract. That may be up to courts. For one thing, the original contract may have referred to how any of its terms could be changed - and an email discussion may not be an allowed method both of you had agreed to/agreed to not use for that purpose. Regardless of this, if any of their email replies to you contained language similar to the following, I wouldn’t even bother consulting with an attorney:

“Nothing in this correspondence is intended to form a contract…”

And this language could be in small print.

I am sorry that you are not finding RWN helpful. Not having bought anything from an affiliate in years - and having never dealt with this one in any way - I am guessing that, like me years ago, you did not have an agent representing you/your best interests. I mean, RWN was not involved in the transaction, but only stood to make its referral fee in case you closed. Given that RWN is an “educational company,” after a couple of “lessons” years ago, I learned to get my local education from locally-licensed agents with fiduciary responsibilities to me.

Please fill in the gaps. Unfortunately, for now, I am inclined to side with the seller in terminating your contract and re-listing - they may owe money to their investors, and delays could be costly.