What happens when earnest money refund taking "too long"?

Question

Okay you keyboard lawyer warriors...just looking for some thoughts on the following scenario regarding delayed refund of earnest money.

Original contract language about earnest money is as follows (this is in Illinois): "The assignment fee is refundable should assignee decide not to move forward during due diligence. Due diligence will be completed on or before 1/30/20 and closing on the property is to be completed on or before 3/9/20. Should the Assignee decide to cancel this assignment agreement after the due diligence period $3000 of the Assignment Fee will not be refundable and be due to the Assignor.

Upon doing due diligence and getting an inspection, assignee decided to cancel the contract on 1/29/20...prior to due diligence period expiring.

Now, it's approximately 10 days after cancelation, and the seller's agent is having "problems" getting a hold of the seller to sign the cancelation agreement form that is apparently required to authorize the title company to refund the earnest/assignment money.

According to PART 1450 REAL ESTATE LICENSE ACT OF 2000, SECTION 1450.750 SPECIAL ACCOUNTS: Disbursement of Escrow Moneys. Once the payor's depository has honored the deposit of escrow funds, the sponsoring broker shall disburse escrow moneys according to the following requirements, as set forth in Section 20-20(a)(17) of the Act:

The sponsoring broker must disburse escrow moneys upon consummation or termination of the transaction. The actual terms of the contract regarding the release of the escrow moneys shall be adhered to by the sponsoring broker holding these escrow moneys. The disbursement must be according to the terms of the contract and must be:

A) made not later than the next business day following the sponsoring broker's receipt of notice of the consummation or termination of the transaction or

B) otherwise disbursed in accordance with the written direction of all principals to the transaction or their duly authorized agents.

So the question is, what is a reasonable and allowable time to disperse escrow money back to the buyer upon termination of the contract?

And, is a signed letter by the seller a "requirement" to meet the intent of the law?

Michael Robbins · Answer

I would take a look at the signed escrow instructions as well. I have seen it where the escrow instructions include a provision to release the earnest money to the buyer after 6 months.

Stephanie Fleming · Answer

It is part of the Ohio State Real Estate board reguarding Earnest Money

Vincent Incopero · Answer

@Steve LeBlanc, standard stuff here.

Money is in escrow and as such, is not going anywhere. Disregard the RE Act as funds aren't being held by a RE brokerage, rather a title company.

Either way, funds cant be released without the required signatures and I imagine that this is a SJO (Strict Joint Escrow) requiring signatures of the Seller and the Buyer in order to direct the funds to be moved.

Have your attorney fire off a "keyboard warrior" email demand to prod the Seller into signing and to get everyone's attention.

Steve LeBlanc · Answer

It was a title company. I did call them the other day and all they could really say was we need a letter signed by the seller. I'm not saying this isn't going to happen, it's just the fact that the money is being held hostage until an agent can property manage his client to get him/her to sign the release letter. Every day it's "she was busy", "she was traveling", "she'll try to sign tonight", etc. You ever get that feeling that you're just being dragged along?

Vincent Incopero · Answer

To whom were the EMD funds wired to? That is the person/place you should be speaking with.

Steve LeBlanc · Answer

Well, the only thing that I signed in this transaction was the assignment contract, that had the lines that I pasted previously about due diligence period. So...with that being said, should I ask the title company for the EMD agreement I signed? And when they say "we don't have one on file, we only have the assignment agreement"...then what?

Michael Noto · Answer

Exactly what @Vincent Incopero said. Get your lawyer involved. That is the only way to get a prompt response in situations like this.

Vincent Incopero · Answer

@Steve LeBlanc, you are far too kind. Truth be told, I see myself as just another ordinary guy that happened to go to Law School for 3 of the best years of my life.

The signature requirement would be set forth with specificity in the EMD agreement that you would have had to sign before title properly took your funds in on deposit.

Steve LeBlanc · Answer

Vincent, a real attorney, thank you for chiming in. Where would I find reference to this required signature of both parties? I ask because it would seem logical that the contract, which is binding, clearly states what the condition of the escrow money is depending on the situation. I guess what is bothersome the most is that, upon signing a contract, I as the buyer must submit my escrow money within "x" days or lose the deal. Now that the contract is canceled, per the contract, it's a "get it back to you when we can" situation. $5000 isn't a big deal for me...but what about for those folks that it's everything? It just seems....unusual that this money can be held hostage for lack of a better term.

Well, I don't have an attorney and paying someone to draft a demand letter...I don't know that I see a point in that.

Steve LeBlanc · Answer

Thank you for your response. What reference do you have for the two year timeframe?

What happens when earnest money refund taking "too long"?

What happens when earnest money refund taking "too long"?

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