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Updated almost 6 years ago, 01/18/2019
Should I try to get my earnest $ back??
I was in escrow on a house out of state. They required a $1000 earnest $ deposit. The escrow papers gave me 2 weeks to inspect property for defects. I asked for a 30 day escrow, but as I recall my realtor made it a 45 day. I had an inspection report done but the pictures weren’t very good. I sent the inspector back out to just text me photos from his phone so I could see them better. He said he couldn’t walk on the roof or go in the attic because it wasn’t safe. So I was laying in bed looking over the photos in detail a week or more before closing the deal and noticed when I zoomed in, the floor joists weren’t just discolored, they were rotted really bad. So bad they would have to be replaced completely to pass an inspection for financing (all of them). Bottom line, I pulled out of the deal and requested my emd back because they marketed a house that needed to be torn down completely and was not able to be saved. Do I have no right to my $1000 emd or am I justified in concluding the house isn’t able to be rehabbed? My realtor put my emd money with her broker and it still sits in their account. However they said they can’t give me the funds back, and since the seller wants my $, it will have to go through arbitration. The broker said I wouldn’t end up getting any money after arbitration anyways. He suggested I split funds with seller and move on. What do you think, should I move on, or get the $ back? One last note: this house was sitting on market for a good while, has water coming through roof, holes in ceilings, and a lot of mold.
I'd attempt to split it with the seller and move on.. The money will just at title (at least here in Vegas) if BOTH parties don't agree on something and sign a release..
@Brandon Carriere ok thanks. Just curious how to handle the next one even if I don’t get funds back. For $1000 it’s not worth waisting time to get If it’s a process. I’ve heard that you can usually get the emd back under most circumstances. I closed 2 way better deals recently, so it’s worth it to me, even if I lose the 1k.
#2 Contractors Contributor
- Severna Park, MD
The fight will be more expensive than the deposit .
@Account Closed
Theres nothing you can really do differently next time.. Try and abide by the dates in the contract, is the only guarantee that it will be refunded.. Id talk to your agent, and have him talk to the other agent and split the emd.. Otherwise it'll literally sit at the title company forever, and get blinded away by their fees until its gone..
@Brandon Carriere alright, I appreciate the help. Just nice to know the rights/ limits. Thanks
@Account Closed you are unclear as to what the contract specifically says. The contract rules. How long was any contingency, and did you meet it? If your right to pull out of the contract had already ended then you are not entitled to your EMD back.
On the other hand if you said you wanted to cancel the contract within any contingency period you absolutely have the right to get the money back.
If you are not entitled NO you should not fight. If you are entitled to the EMD I would make an effort to get it back. How hard I fought would depend on how much effort it takes. How much money and time is worth fighting for $1,000
What he's saying is the seller likely didn't disclose a major material defect thats an absolute deal breaker.. Granted it was after the contingency expired, but still, it shouldn't take but a phone call to the other agent to explain.. Basically, either they both get $500 back, or they both get $0.. Right, wrong, or otherwise, they're both sort've at fault and makes sense to split it and move on
@Account Closed From the info you provided it sounds like you are trying to back out of a contract because of an inspection issue after your inspection period expired.
In this case if I was the seller I would definitely not be OK with giving you your full deposit back so I understand where they are coming from actually. This is an issue between you, your agent, and your inspector. Somewhere the communication broke down.
With that said, the seller cannot go under contract with another buyer until the issues with your deal are resolved. Use that as leverage. Propose a split and move on would be my advice.
We were in a similar situation for one of our flips we sold last year. Only difference is the buyer was backing out because he got cold feet, not because of any contingency. In the end the buyer did not have a leg to stand on as far as getting his deposit back, but we agreed to a split because we had a backup offer we wanted to move forward with and time was of the essence.
- Michael Noto
@Michael Noto ok good point on the leverage. I didn’t know about that. Just out of curiosity, would they still be obligated to sell to me @ contract price if they refuse to give back the earnest $? Obviously I don’t want to buy a giant stack of mold, but for future reference it would be nice to know. I just purchased two out of state houses, site unseen and no inspection, so I’m not one to back out unless I really have to. I was just surprised to find such rot on the floor joists once I really zoomed in on the photos and considered that to be really shady trying to sell a house that is rotting on the base of the house that bad. I knew the roof was leaking into the house, but I think the standing water in the basement rotted the floor joists. Whatever the outcome, I realized something that was a blowout at the final hour, and made the necessary decision to cancel the purchase, after the inspection period had expired. The reason why I didn’t notice it before my 2 week inspection time expired is because my inspector went out and shot a few photos, copied a bunch of standard disclosures and called it an inspection. Once I finally got him back out to shoot more photos, it had been 2 weeks time, so at that point I was hoping for the best, but had to deal with the situation. Note to investors: its more profitable to have a kid go out and shoot a bunch of photos with an iPhone, than an inspector who emails some pixleized photos that you can’t zoom in on. It’s amazing the damage that can show up when you can zoom in on a photo and see clearly!!
@Account Closed
I cant imagine a scenario where the sellers wouldn't move forward with you, if you changed your mind and didn't cancel.. The sellers aren't "giving the earnest money back to you".. The money is sitting either in a brokerage account, or a title company, or wherever your state puts it.. In order to be released back to you, or split between you and the seller, BOTH you and the seller need to sign a release for that to happen.. If you or the seller refuse to sign, the money will sit in escrow forever and the deal is essentially dead..
Depending on your states laws, that may prohibit the seller from moving forward and accepting any other offers until yours is resolved one way or another (which again may give you leverage to get some or all of your earnest $$ back..) Reason being is that youre technically still in escrow, and you cant really be in escrow with multiple buyers for the same house.. Once the contract officially ends, your leverage dissipates a bit
And yes, I'd lose that inspectors phone number and find a different one..
If I was your agent (laws could be different there, but probably similar premise in any state) I'd call the other agent and explain its in the sellers best interest to split the EMD with the buyer and be done with each party going their separate ways.. It would be pretty easy to play hardball and make that happen.. Now, its unfortunate the way it played out and your inspector basically screwed you.. You don't really deserve the money back (not really your fault but more-so your inspectors) , but with all the leverage you have, your agent should fight for you and get 1/2 of the EMD back for you regardless, because thats their job..
Good luck..
@Brandon Carriere ok, thanks. I usually bring my problems to BP when they are beyond me. Part of the reason this is so complicated is because my agent went on Christmas vacation to another country during this process and I couldn’t get a hold of her. Finally I called her office and found this out and they set me up with a newbie guy that helped me close a different house but is very disattached from these problems and told me the $ is with their broker in their office and to call him. The broker doesn’t care enough to respond to my email, or call me back so it’s just a snowball scenario. My realtor bailed and isn’t helping me at all, even though she took her commission on a house I closed on a month ago. The title company chewed her out for not being responsive when it was time to close escrow on the one I purchased and I expressed through email frustration that she wasn’t helping me and out of country on the whole closing week without telling me haha. Doesn’t get much worse than that? Seems like all these type of problems work out for good in the process somehow. The other day I was bidding to buy a house on Auction.com and my customer distracted me in the last few minutes of the auction and I missed a property I had researched for 2 weeks because of her! A few days later I took that same $ and found a house 10x better for same price, so who knows. Maybe I could go back to the seller and offer way less because of the mega problems and find a way to negotiate the thing into a deal for the 1 acre it sits on. I’m starting to get to the point of being over leveraged, but my new real estate addiction is pushing me forward to excellent deals, but the rehab needs to catch up to the purchases! Fun stuff.
