Does the seller or bank have claim to a short sale deposit?

Question

My wife and I had an offer in on a short sale.  Long story short, the bank eventually accepted and we were moving forward.  Two days after the end of the inspection period, I found out I had to move out of the area for work.  We assumed we had forfeited the deposit to the bank.  But, we just received a letter stating that the sellers, not the bank, is claiming the deposit (which is currently in escrow).

The way I understand short sales is that the bank is the only party on the selling side that can claim the escrow deposit.  My realtor has also encouraged me to claim the entire amount.  But the seller has offered to split the deposit 50/50.  Obviously 50% of the deposit is more than I expected to get back, but I feel like the seller is bullying me into giving them money they are not entitled to.

Does anyone know who would actually have a legal claim to the money?

Thanks

William D. · Answer

The seller has the claim to the deposit, not the bank. Think about it, the purchase and sales contract is between you (the buyer) and the seller; whereas, you the buyer promise to buy and the seller agrees to sell for an agreed upon price , conditioned upon the bank releasing their lien for less than they are owed. The bank is not a party to the transaction in a legal sense.

If you legitimately breached the purchase contract and all contingencies have passed then a 50% refund is not a bad deal. The seller lost that entire time period of marketing so it seems like a fair result to me.

Maryann L. · Answer

It's a complete misconception that the seller can't get money back.  I would say TRADITIONALLY and HISTORICALLY in short sales, the seller gets no money, but I've seen cases where the lender allowed the seller money.  Chase is offering $20,000 back right now to someone I'm dealing with.

Keep in mind a short sale is just like a good old regular sale and sellers and buyers are contractually obligated.  The only difference is the lender has to approve the terms of the sale.  The parties have willingly consented to the terms.  A short sale approval is merely a contingency of the contract, such as inspections, appraisals and financing.

Ophelia Nicholson · Answer

I actually disagree - I think the bank has the claim to the deposit not the seller- Reason being that in a usual sale with a normal buyer and seller yes the selller would have claim. However short sales and the short sale approval usually specifically says the seller cannot benefit or get any money back period. 
If thats the case then how can they get back the 1k security deposit. My reasoning could be all wrong though

Maryann L. · Answer

Yes, William is right.  Your contract is with the seller of the property.  Not the lender.  The lender merely agrees to the purchase price or not.

Does the seller or bank have claim to a short sale deposit?

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