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Old 01-12-2010, 09:15 AM
 
35 posts, read 108,744 times
Reputation: 32

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My husband may be transferred to the Norfolk area. We have not started looking at homes yet, but I do have some questions on Virginia law with respect to earnest money deposited on a house one intends to buy.

1) Where is the earnest money held? By the listing agent in an escrow account, or elsewhere?

2) If the deal falls apart over something like an appraisal lower than the agreed upon purchase price (thus meaning financing can't be obtained) what happens to the earnest money?

3) Do both parties have to sign a release for the earnest money to be returned to the buyer?

4) Is there a specific period of time in which the earnest money must be returned to the buyer?

5) Does a standard contract call for arbitration if there is a dispute arising over the purchase?

6) Does VA law allow a plaintiff to sue for attorney's fees?

Thanks in advance.
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Old 01-12-2010, 01:38 PM
 
Location: Hampton Roads
140 posts, read 539,551 times
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I can try to answer most of those questions:

1. The earnest money IS held in an escrow account, by either the listing or selling firm, depending on how the offer is written. The escrow account is a separate account in which funds are held just for that purpose and are not to be mixed with other company monies. Oftentimes the listing may specify that the listing firm is to hold the money, but I usually write offers for my buyers with my firm holding the money and if is very rarely countered. I like to have my firm hold it so that if an offer falls through it is much easier and usually quicker to get the funds back to apply to another offer.

2. Money is disbursed on a case-by-case basis. For the example you cited, it would most likely be returned to the buyer. Also, if a home inspection turned up a major defect that the buyer wasn't comfortable with, the buyer would likely get it back. If the buyer just decided for no reason other than maybe cold feet, it might not all come back to the buyer as the seller could argue that they lost valuable marketing time while the property was pending.

3. Yes, both parties have to sign the release and agree how the funds are disbursed.

4. There is no specific timeline on the standard form, but it is usually in the seller's best interest to do it as soon as possible so they can fully market the home again. If not they could only accept subsequent offers subject to the release.

5. The standard REIN contract does have a paragraph requiring arbitration before litigation. Sometimes this language is struck from the contract.

If you haven't already made an offer, it sounds like you could benefit from a good buyer's agent to fully explain all of these nuances. I can also recommend a great real estate attorney if desired.

You may want to check out this website as well. It answers all or most of your questions in depth:
www.ask-a-guru.com
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Old 01-12-2010, 06:14 PM
 
35 posts, read 108,744 times
Reputation: 32
BrianLMA -

Thanks so much for your answers. They are extremely helpful. It probably seems odd that I am posing such specific questions, but my husband and I were looking to buy in PA (before we found out he might be transferred) and are in the midst of a very ugly situation with return of our earnest money on a home that was appraised at significantly less than the purchase price. We were curious about law in VA vs. PA in case, heaven forbid, were we to find ourselves in a similar situation. The law seems similar, with the exception of arbitration and the release of the funds being required before the house can be fully marketed. Unfortunately in PA, there is no such requirement, so the sellers can refuse - in perpetuity - to release the funds if they so choose, and the only option to try and get one's money back is to take them to court.

Right now we don't even know if we are going to be moving, but if we do I might take you up on recommendations you might have.

Thanks again.
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