Seller not signing the release of EMD
Hi Everyone, I was under contract for a property but I didn't qualify for financing because the lender that provided the preapproval changed its financing source while I was looking for properties for a couple of weeks and as of now, they do not provide loans for foreign nationals anymore.
They didn't tell me about that until I went under contract and applied for a loan. I wasn't able to find another lender who would require less than 30% cash and lots of points, so I didn't qualify with any other lender either and had to release the contract.
Despite all this, the seller is not willing to release the EMD, he offered 25% of the $5,000 EMD which is insane considering that we had a financing contingency in the contract. I can prove that I had about 100 emails back and forth with different lenders and I also have a denial letter. My agent says that there is a clause based on which he can dispute it and then the EMD stays in escrow for 2 years.
Is the seller allowed to refuse to sign the release if he has no reason to base a dispute on?
I signed the purchase agreement of REMAX which also says this.
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EARNEST MONEY: In the event of a dispute between the Seller and Buyer regarding the disbursement of this earnest money, the broker is required by Ohio law to maintain such funds in the broker’s trust account until the broker received (a) written instructions signed by the parties specifying how the earnest money is to be disbursed or (b) a final court order that specifies to whom the earnest money is to be awarded. If within two years from the date the earnest money was deposited in the broker’s trust account, and the parties have not provided the broker with such signed instruction or written notice that such legal action to resolve the dispute has been filed, the broker shall return the earnest money to the purchaser with no further notice to the seller. The broker shall acknowledge receipt of the earnest money shown on line 28 to the escrow agent who shall credit that amount to the BUYER’S escrow account. Unless otherwise stated herein, the earnest money shall be retained in the broker’s trust account until after title transfer at which time it shall be applied against any compensation due the broker. Any amount by which the earnest money exceeds the compensation due the broker shall be remitted to the escrow agent.
Thank you for your thoughts!
This is a great example of why REALTOR contract forms often suck. They are drafted in such a neutral way that parties have to go to court (or mediation) even when one party has no legal ground to stand on.
The contract language here essentially requires either (a) joint instructions, (b) court order, or (c) 2 years of inactivity with neither of the above occurring.
Imagine agreeing to have a large EMD sit for 2 years in an interest-free account just because the other party is an a**hole and consider that everything is negotiable. Cross out language like this and replace it with negotiated terms such as automatic forfeitures and releases, penalties for failure to sign, loser pays attorneys fees, etc.
Quote from @Russell Brazil:
Quote from @JD Martin:What here in the ops description suggests an Impropriety by the agent? The seller is refusing to release the funds, that's not the agents choice. One thing that people often overlook is that when someone may file a frivolous lawsuit or ethics complaint is that they run the risk of being sued/countersued for abuse of process. If someone filed a frivolous complaint against me I'm automatically out $5k for my e&o insurance deductible. So Id have no qualm suing for abuse of process.
Quote from @Barbara Berta:
Thank you everyone for the great advice!
The dispute is still not resolved, the seller still hasn't signed the release, so as a first step, I initiated a complaint with the real estate board.
I think in Ohio you can file in small claims court for amounts up to $6k. It's cheap and fast, so you should go forward with it. The court can order the money released back to you without the seller's permission. You can also drag it out - after 2 years they have to give it back to you unilaterally if the seller hasn't obtained a court order to take the money. Small claims would be better and faster, but whatever you do don't give in. And filing the ethics complaint is just something you do on top of it all, not as a way of getting your money back. I filed an ethics complaint against my old PM in Florida last year and we had a hearing. The Board ate him and his broker alive. Total fines for him was $1500 plus mandatory ethics and finance training in order to keep his license, and $1000 on his broker for improper supervision. That didn't get any of my money back from the crook but it sure felt good 😊
The agent has interest in the deal, and he is the leader of xx RE group so after he refused to sign the release my agent’s brokerage went directly to his principal broker but it didn’t help…
Quote from @Barbara Berta:
Quote from @Russell Brazil:
Quote from @JD Martin:What here in the ops description suggests an Impropriety by the agent? The seller is refusing to release the funds, that's not the agents choice. One thing that people often overlook is that when someone may file a frivolous lawsuit or ethics complaint is that they run the risk of being sued/countersued for abuse of process. If someone filed a frivolous complaint against me I'm automatically out $5k for my e&o insurance deductible. So Id have no qualm suing for abuse of process.
Quote from @Barbara Berta:
Thank you everyone for the great advice!
The dispute is still not resolved, the seller still hasn't signed the release, so as a first step, I initiated a complaint with the real estate board.
I think in Ohio you can file in small claims court for amounts up to $6k. It's cheap and fast, so you should go forward with it. The court can order the money released back to you without the seller's permission. You can also drag it out - after 2 years they have to give it back to you unilaterally if the seller hasn't obtained a court order to take the money. Small claims would be better and faster, but whatever you do don't give in. And filing the ethics complaint is just something you do on top of it all, not as a way of getting your money back. I filed an ethics complaint against my old PM in Florida last year and we had a hearing. The Board ate him and his broker alive. Total fines for him was $1500 plus mandatory ethics and finance training in order to keep his license, and $1000 on his broker for improper supervision. That didn't get any of my money back from the crook but it sure felt good 😊
The agent has interest in the deal, and he is the leader of xx RE group so after he refused to sign the release my agent’s brokerage went directly to his principal broker but it didn’t help…
Ohio law is pretty clear on EMD. If they won't sign you'll need a court order releasing the funds. Or you can wait 24 months.
Quote from @Scott Schnabel:
Quote from @Barbara Berta:
Quote from @Russell Brazil:
Quote from @JD Martin:What here in the ops description suggests an Impropriety by the agent? The seller is refusing to release the funds, that's not the agents choice. One thing that people often overlook is that when someone may file a frivolous lawsuit or ethics complaint is that they run the risk of being sued/countersued for abuse of process. If someone filed a frivolous complaint against me I'm automatically out $5k for my e&o insurance deductible. So Id have no qualm suing for abuse of process.
Quote from @Barbara Berta:
Thank you everyone for the great advice!
The dispute is still not resolved, the seller still hasn't signed the release, so as a first step, I initiated a complaint with the real estate board.
I think in Ohio you can file in small claims court for amounts up to $6k. It's cheap and fast, so you should go forward with it. The court can order the money released back to you without the seller's permission. You can also drag it out - after 2 years they have to give it back to you unilaterally if the seller hasn't obtained a court order to take the money. Small claims would be better and faster, but whatever you do don't give in. And filing the ethics complaint is just something you do on top of it all, not as a way of getting your money back. I filed an ethics complaint against my old PM in Florida last year and we had a hearing. The Board ate him and his broker alive. Total fines for him was $1500 plus mandatory ethics and finance training in order to keep his license, and $1000 on his broker for improper supervision. That didn't get any of my money back from the crook but it sure felt good 😊
The agent has interest in the deal, and he is the leader of xx RE group so after he refused to sign the release my agent’s brokerage went directly to his principal broker but it didn’t help…
Ohio law is pretty clear on EMD. If they won't sign you'll need a court order releasing the funds. Or you can wait 24 months.
Sounds like that's the law only if a OH real estate broker holds the earnest money... although many title companies follow the same policy, which is basically just CYA.
Standard verbage in Ohio contracts...
NOTE: In the event of a dispute between SELLER and BUYER over the return or forfeiture of earnest money
37 held in escrow by a Broker, the Broker is required by state law to retain said funds in the Broker's trust or
38 escrow account until a written release from the parties consenting to its disposition has been obtained or
39 until disbursement is ordered by a court of competent jurisdiction.
The seller has no reason to withhold the entire amount of the earnest money, given the terms of the financing contract. According to the agreement, the deposit must be returned if financing fails. Having documents confirming communication with several lenders and refusal of a loan, you have grounds for returning the deposit. If the seller insists on delaying funds, you should seek the help of a lawyer.