Seller refuses to return earnest money to us - Please HELP!

[Northstar]

Thanks Lisa. At this time, I don't think the seller has our earnest money. Base on ILL real estate law it should be held in an escrow account and neither party can get it unless the parties agree to release it. Our contract states, "Buyer shall serve Notice upon Seller or Seller's attorney of any defects disclosed by any inspection for which Buyer requests resolution by Seller, together with a copy of the pertinent pages of the inspection reports within 5 Business Days (this is our attorney's error because she served notice on the 6th day). If within 10 business day after the date of acceptance written agreement is not reached by the Parties with respect to resolution of all inspection issues, then either party may terminate this contract by serving Notice to the other Party, whereupon this contract should be null and void"

- Our contract states, "In every instance where this contract shall be deemed null and void or if this Contract may be terminated by either Party, the following shall be deemed incorporated 'and earnest money refunded to the Buyer upon written direction of the Parties to Escrowee or upon entry of an order by a court competent jurisdiction." Well we did sign the contract before giving them the earnest money actually we signed 2 contracts before issuing an earnest money check. One for our original offer and the second when she increased the purchase price.

Do you know whether THIS deadline was met... did your attorney inform them of your intention to terminate the contract (because of failure to agree on inspection-related repairs) by the 10th business day?

Because if he didn't, from their point of view, you are breaking the contract and they get to keep your earnest money.
After five business days and no inspection report issues, they were thinking "Hallelujah! The deal is done!" Then day 6... oops, no, lots of problems. The deal isn't looking so good to them now so they turn down your two proposals for repair, hoping you'll want the place bad enough to just bite the bullet and do the repairs yourself without financial penalty to them. 10 business days, they're holding their breath, it's your last chance to back out... Hallelujah! No word from you (assuming your attorney missed this deadline). The deal is done and they didn't have to reduce their price or make repairs!
A day or two or three later, suddenly your attorney says you want to back out of the contract. Well, now you don't have grounds for termination without penalty. They can keep the earnest money... that's what it's intended for, compensating them if the buyer isn't serious and wants to keep dancing around changing the deal.

So it's important for you to know if the attorney informed them of your intention to back out within the time limit of 10 days!

I still think it's your agent and attorney who are to blame and should compensate you for losing your earnest money.

 

[shortbun]

In Ohio, the buyer's agent keeps the earnest money until closing then returns it to their customers. The seller never sees it. We just went through this twice.

 

[CaliforniaDreamin]

In Ohio, the buyer's agent keeps the earnest money until closing then returns it to their customers. The seller never sees it. We just went through this twice.

That's what we did. I thought Earnest Money was a serious promise by the buyer made to the seller that they have commited buying the house (unless any term of the contract changes, and then you and the seller can renegotiate if there are problems with the house.) Once earnest money is received, doesn't the seller have to take the house off the market? I don't know....it's been 15 years since we did this.

But if the original price agreed upon by both parties or terms of the contract have changed and they are not in your favor, you should receive every penny back.

 

[richmond282]

We've bought 3 houses and sold 2. We have never had our earnest money check cashed. It was always given back to us at closing. We also have never received any earnest money from anyone purchasing our house. I second contacting a (different) lawyer and/or small claims court.

 

[DiSnEyFrEaK22]

Mini update....

At the closing of our new house our real estate agent gave us a check for $2,000 which was more than half of what we lost during the first transaction. I believe he does expect us to pursue a court filing with our new attorney. At this point, I'm not sure if that's something I want to get into. More money, more drama, and more hassle and I'm not even sure we have a valid case against the other party.

The moral of the story is never give more than $1,000 for your earnest money deposit & also although they are the trained professionals never leave it up to anyone but yourself to know and understand your contract and its deadlines. Lesson learned for me.....

Thanks for everyone's input

 

[RadioFanatic]

$2500. is a relatively small amount; should be small enough for small claims court. Go file and list the seller and the att'y on the claim. Good luck!

I would also sue the realtor - weren't they the ones who were late getting the inspection report to the attorney?

 

[DiSnEyFrEaK22]

I would also sue the realtor - weren't they the ones who were late getting the inspection report to the attorney?

Yes/No, our realtor gave it to the attorney 2 days before the review was due. Well, he did compensate us for $2,000 of the $2,500 so I guess there isn't much more we can do.

 

[ccgirl]

Realtor here. Not sure of the laws in IL but in MA, a realtor cannot recommend anyone else due to conflict of interest. This includes mortgage companies, inspectors, attorney's etc. I'm not saying they don't - they are just not supposed to. If we do "recommend" people, we have to "recommend" no fewer than 3 people and let the buyer/seller decide who to use. Also, the earnest money is held by the real estate agency. Was your real estate agent a realtor or broker? I would go to the broker to get the rest of your money back. At the very least, report them to the Board of Realtors to see if they can help with getting your money back. I have never heard of someone raising the price of the house after the earnest money was accepted. In any case, I am glad you found a new home but I would definitely keep hounding your realtor until you get the $500 back. The fact that they gave you $2000 and not the additional $500 seems fishy to me. Tell them you want the $500 or will be reporting them to the board of realtors. Good luck!

 

[DiSnEyFrEaK22]

Realtor here. Not sure of the laws in IL but in MA, a realtor cannot recommend anyone else due to conflict of interest. This includes mortgage companies, inspectors, attorney's etc. I'm not saying they don't - they are just not supposed to. If we do "recommend" people, we have to "recommend" no fewer than 3 people and let the buyer/seller decide who to use. Also, the earnest money is held by the real estate agency. Was your real estate agent a realtor or broker? I would go to the broker to get the rest of your money back. At the very least, report them to the Board of Realtors to see if they can help with getting your money back. I have never heard of someone raising the price of the house after the earnest money was accepted. In any case, I am glad you found a new home but I would definitely keep hounding your realtor until you get the $500 back. The fact that they gave you $2000 and not the additional $500 seems fishy to me. Tell them you want the $500 or will be reporting them to the board of realtors. Good luck!

Wow, I did not know realtors could not recommend people, he recommended our first attorney, our current attorney, and the inspection company. Actually, he is the realtor & broker of his office. He said he was only going to give us $2,000 because it was not entirely his fault. This seems like such a crazy deal, doesn't it?!

 

[bicker]

Your story made it clear where the fault, and therefore responsibility for restitution, rests...

The problem is our agent supplied our attorney with the inspection report late and therefore when she drafted up the letter requesting that repairs be made it was 1 day late per our contract.

Good luck.

 

[Piglets Mommy]

Wow, I did not know realtors could not recommend people, he recommended our first attorney, our current attorney, and the inspection company. Actually, he is the realtor & broker of his office. He said he was only going to give us $2,000 because it was not entirely his fault. This seems like such a crazy deal, doesn't it?!

Sounds like he isn't the greatest Broker...as the Broker, he has more responsibility than a Realtor. He is partly at fault here...I'd ask him for the other $500 or you will report him th the board of Realtors.

Your story made it clear where the fault, and therefore responsibility for restitution, rests...Good luck.

Yes and no, depending on the state. In many states, it's up to the Realtor to get all of the paperwork in by the dates on the contract even if an attorney is involved as well. At the very least, he should have asked for an extension. I've had this happen a few times, on both sides of the transaction.

OP, did they change the price on a date after you signed the initial contract? If so, the dates should have all reset on that date, giving you more time. If it all happened in the same day, then it wouldn't matter anyway. I'm sorry this is happeningto you. I don't think I would bother taking it to court at this point, since you said you did get 2,000 back. But I WOULD go back to the Realtor/Broker, let him know that you know he is wrong, and ask for the other $500. He knows he is wrong and wouldn't want to lose his license over $500. Good luck with all of this, and enjoy your new home!!!

 

[ccgirl]

Wow, I did not know realtors could not recommend people, he recommended our first attorney, our current attorney, and the inspection company. Actually, he is the realtor & broker of his office. He said he was only going to give us $2,000 because it was not entirely his fault. This seems like such a crazy deal, doesn't it?!

Very crazy...Definitely get the $500 from him. HE was late filing the paperwork.

 

[scrapquitler]

Hi everyone! We put down a $2,500 earnest money deposit (our agent's idea to show the seller we were serious). Which later I find out is wayy to much, it's typically $1,000. So the check was cashed within 36 hours.

The agent gave the earnest money to the seller??

I've never heard of that. Normally, that check is placed in the Agent's escrow account until the day of the closing. Neither the seller nor the buyer has access to that money until closing day.

 

[DiSnEyFrEaK22]

Very crazy...Definitely get the $500 from him. HE was late filing the paperwork.

I will definitely try

 

[DiSnEyFrEaK22]

The agent gave the earnest money to the seller??

I've never heard of that. Normally, that check is placed in the Agent's escrow account until the day of the closing. Neither the seller nor the buyer has access to that money until closing day.

Sorry, I must have said that wrong the first time. The seller's real estate agency cashed the check after we gave it to them. It's still in that account, I'm assuming. It looks like neither one of us are going to get it I heard it gets transferred to the State of Illinois after 6 months.

 

[anna_chronistic]

My situation is a little different, but also odd. I purchased my first house -- gave $500 earnest money check last week of April, signed purchase agreement before April 30, closed June 4 ... and the earnest money check was never cashed! I didn't receive it back at closing, but it was figured into the down payment. This money is still sitting in my account, the check is still -somewhere- out there, and I have no idea what's going on.

When I went over all the paperwork with my realtor and my mortgage agent, they kept saying the earnest money would be in escrow until closing. I thought maybe it just took a couple weeks to "clear" the check. But it has been 2 1/2 months!

What I honestly think happened is that the seller's agent lost the earnest money check. He was extremely scattered, lost paperwork twice during the whole process of them selling the house, left the "sold" sign on my property for weeks after the close, etc. I'll call my agent tomorrow morning, but am I going to need to cut another check? I'm OK with that -- it's the right thing to do. But it's aggravating, to say the least! I'll look over my paperwork again to make sure I wasn't supposed to have it returned at closing, but I really think that was supposed to go to the buyers.

I'm just glad my realtor knew what he was doing, but the whole process still seems unfinished to me -- more than a month after closing! -- because my earnest money is still sitting in my bank account. Grr.

 

[DiSnEyFrEaK22]

My situation is a little different, but also odd. I purchased my first house -- gave $500 earnest money check last week of April, signed purchase agreement before April 30, closed June 4 ... and the earnest money check was never cashed! I didn't receive it back at closing, but it was figured into the down payment. This money is still sitting in my account, the check is still -somewhere- out there, and I have no idea what's going on.

When I went over all the paperwork with my realtor and my mortgage agent, they kept saying the earnest money would be in escrow until closing. I thought maybe it just took a couple weeks to "clear" the check. But it has been 2 1/2 months!

What I honestly think happened is that the seller's agent lost the earnest money check. He was extremely scattered, lost paperwork twice during the whole process of them selling the house, left the "sold" sign on my property for weeks after the close, etc. I'll call my agent tomorrow morning, but am I going to need to cut another check? I'm OK with that -- it's the right thing to do. But it's aggravating, to say the least! I'll look over my paperwork again to make sure I wasn't supposed to have it returned at closing, but I really think that was supposed to go to the buyers.

I'm just glad my realtor knew what he was doing, but the whole process still seems unfinished to me -- more than a month after closing! -- because my earnest money is still sitting in my bank account. Grr.

If I were you I would issue a stop payment on your check just in case someone finds it, I wouldn't want your check to sit in an escrow account like mine. It normally doesn't get returned unless the deal goes sour (per the contract). Do you want to apply the earnest money check to the purchase price of the house? Maybe you can submit an extra $500 with your mortgage payment? Congrats on getting the first time homebuyer credit!!

 

[anna_chronistic]

Thank you! Yes, I just made the cut-off for the first-time homebuyer's credit. I didn't really understand it when I spoke to my mortgage agent at first. I thought it was more like a tax write-off -- I didn't realize I would actually get a check for $2,900 (yes, my house -- 444 square feet -- cost $29,000. What can I say? Small town, cheap price per square foot!).

You're right. I think I will need to issue a stop-payment. I'll check with my realtor first, though. I'm so thankful that I didn't go with the seller's realtor. It's a small town, and I think he was a bit irked that I didn't contact him, since he was the listing agent, but my realtor was worth his weight in gold. He answered all my questions (even the most likely stupid ones), and I felt like he gave me as much attention as he would have if I were buying a $200,000 house. When I sell, I know exactly which realtor I'll use!

Sorry for the hijack!

 

[DiSnEyFrEaK22]

Thank you! Yes, I just made the cut-off for the first-time homebuyer's credit. I didn't really understand it when I spoke to my mortgage agent at first. I thought it was more like a tax write-off -- I didn't realize I would actually get a check for $2,900 (yes, my house -- 444 square feet -- cost $29,000. What can I say? Small town, cheap price per square foot!).

You're right. I think I will need to issue a stop-payment. I'll check with my realtor first, though. I'm so thankful that I didn't go with the seller's realtor. It's a small town, and I think he was a bit irked that I didn't contact him, since he was the listing agent, but my realtor was worth his weight in gold. He answered all my questions (even the most likely stupid ones), and I felt like he gave me as much attention as he would have if I were buying a $200,000 house. When I sell, I know exactly which realtor I'll use!

Sorry for the hijack!

No worries. Oh yeah, a live check! We also just met the 4/30 deadline. I am expecting mine in 6-12 weeks from the IRS. Wow, I live in Illinois too!! I wouldn't mind living in a small town for that price Do you live in Southern IL?
I would check with your realtor too just to keep him in the loop. Don't worry about the listing agent, he still got some money out of the deal...he just wanted it all for himself

 

[krnlmustrd]

I recently offered on two houses and both asked for additional earnest money from the $2500 (standard in GA?) we offered. The house we ended up buying wanted $5000 in earnest money! You can bet we watched every term of the contract like a hawk. That's too much money to risk not crossing every T and dotting every I.