I have had a look at the finance clause and it specifies the lender's name (ANZ), as well as the exact amount that was intended to be borrowed, so I don't think that is the problem.
The main issue is that the vendor doesn't believe that the buyer tried hard enough to get finance from the bank.If the contract never went unconditional, surely the real estate agent is obliged to release the deposit back to your friend immediately. (At least I think they would be in QLD.) It would be up to the vendor to take legal action to prevent release, rather than the onus being on your friend to try and get her money back. The default position if an unconditional contract falls over is the deposit being refunded.
The vendor may have "instructed the agent not to release the deposit", but I wouldn't have thought the vendor had the power to issue these instructions, ie no obligation on part of RE agent to comply. On what basis has your friend had previous advice that the vendor is entitled to withhold the deposit – is that when the RE agent thought it was because she missed the 4pm deadline? If so, advise the RE agent that the vendor's position is now that she did not make legitimate endeavours to obtain finance, in which case, that's not grounds for the deposit to be withheld; it's grounds for the vendor to pursue your friend in court (which I don't think they'll do anyway).
According to the lawyer as the vendor believes that the buyer has not "acted in good faith," the letter from the bank stating that finance has been rejected does not terminate the contract. Therefore the contract between the buyer and the vendor is still in place and so the deposit does not have to be returned.
I wonder how many of us in the same situation as the vendor would keep the money. We are in the investing game and if we were to get a windfall because someone was ignorant of the procedure and failed to secure a solicitor, would we keep the money?
I might be inclined to keep an amount that covered mortgage repayments for a few weeks until a new buyer was found but no where near 20k. But Im not even sure I could do that to someone.
'what goes around, comes around'
Sorry but the lawyer sounds like a dill and is hanging out for a fat fee packet! The Financier was identified, and a letter has been forwarded from the Financier declining finance, the contract was subject to finance approval and in this case, it was not- what more does the Vendor want?
The time factor would be a more serious issue in my opinion as your friend was tardy with the time – a contract is a contract and one cannot be 45 minutes late or 4-5 days late. Late is still late!
Sounds like a real sorry fiasco all round. ( I find it interesting when lawyers start scaring the living daylights out of you by outlining their fees and then adding on the bit about, 'oh it is also possible that you would be up for the other party's fees as well..' and you start to feel like you're sinking in quicksand!
I'm with astrawan – I really think a good solicitor could sort this out very quickly by sending one sternly worded letter to the real estate agent telling them that they have no legal right to withhold the deposit. If the vendor feels the purchaser acted in bad faith, let them initiate legal action, but that's not grounds for withholding the deposit.
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