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Say the buyer backs out at the last minute because they simply get cold feet or decide they want another house. So none of the contingencies apply in the contract that would grant them a refund of their money.
They still want the money back anyway and refuse to sign a release letting the seller have it. Assume these are jerks and they just don't want to give you the money. So they flat refuse to sign.
What recourse does the seller have? Suing over as little as $1500? Is that really what it can come down to if a buyer decides to be an ass about this?
I had a buyer terminte Wednesday and we were supposed to close yesterday. They understood they would NOT receive the earnest money. Most buyers understand when they back out for nothing, they lose their earnest, which means good faith. They lost over $4500, but felt it was right for them.
In Texas, if a party refuses to sign the release, the other party can sue for 3 times the amount. $1500 is no longer $1500, it's $4500. Read the contract, because it should say specifically what the time line is for how to release the funds if one party won't sign.
In Florida if one party won't sign the release we have a free process to determine who is entitled to the disputed escrow funds. The broker holding the funds send the details of the dispute to the Florida Real Estate Commission and a committee reviews and issues an escrow disbursement order. No cost to either party. Note that this is not available for funds held in title company or attorney escrow accounts. Florida buyers and sellers, keep that in mind when your agent suggests holding the deposit with a title company or attorney.
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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A buyer with any brains will always have some contingency to avoid get the money back if they find something better at the last minute, if only the inspection. If they have all been met, they will have to surrender the funds
eventually, and it's up to the realtor to push for it.
Here on Long Island, where it's hard to find a home under $300K and very easy to find one over a million, the 10% earnest money is serious business. However, I would bet that a lot of buyers where I live would challenge the loss of the earnest money and even go to court over it, coming up with some excuses or nitpicks in the contract -- however lame -- as to why it should be returned.
It only happened to me once when we discovered just days before closing that the sellers had a $142K tax lien on the home and couldn't satisfy it at closing. Per the contract, we were on solid ground in backing out. As mentioned in a previous post, we had to threaten to make their lives miserable and tell them we would spend more than the earnest money in legal fees to do so. Of course, we got the money back fairly quickly, but they initially intended to keep it.
In Florida if one party won't sign the release we have a free process to determine who is entitled to the disputed escrow funds. The broker holding the funds send the details of the dispute to the Florida Real Estate Commission and a committee reviews and issues an escrow disbursement order. No cost to either party. Note that this is not available for funds held in title company or attorney escrow accounts. Florida buyers and sellers, keep that in mind when your agent suggests holding the deposit with a title company or attorney.
The buyer or seller can file suit in civil court even if the broker is holding it in an escrow account. As a buyer I would much rather the title company or attorney hold the funds than the listing broker. As a seller I wouldn't be as adamant but would still probably rather the title company hold it.
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