Seller not signing the release of EMD

Cleveland, Ohio
Buying & Selling Real Estate
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Seller not signing the release of EMD

Barbara Berta
Member since 2023 · 30 posts · 28 votes

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. 

  1. 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!

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Russell BrazilBusiness Member
Moderator
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
2y
Quote from @Barbara Berta:
Quote from @Russell Brazil:

Did your financing contingency specify a certain amount of days? And if so Did you blow through that number of days or did you provide the financing denial letter before those days expired?

If you did miss the deadline, why wasn't your agent cognizant of the deadline?

 Yes, and the deadline was April 22, which is 6 days from now.


 Seems pretty straight forward then. If Ohio has them, have your agent file a case with the administrative law judge to get an order to release the funds. 

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    2y

    yes seller can withhold signing. happens more often than you might imagine.

    normally there is a time limit on financing contingency..

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  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    2y

    Did your financing contingency specify a certain amount of days? And if so Did you blow through that number of days or did you provide the financing denial letter before those days expired?

    If you did miss the deadline, why wasn't your agent cognizant of the deadline?

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  • Barbara Berta
    OP
    Member since 2023 · 30 posts · 28 votes
    2y
    Quote from @Russell Brazil:

    Did your financing contingency specify a certain amount of days? And if so Did you blow through that number of days or did you provide the financing denial letter before those days expired?

    If you did miss the deadline, why wasn't your agent cognizant of the deadline?

     Yes, and the deadline was April 22, which is 6 days from now.

    0Reply
  • Barbara Berta
    OP
    Member since 2023 · 30 posts · 28 votes
    2y
    Quote from @Jay Hinrichs:

    yes seller can withhold signing. happens more often than you might imagine.

    normally there is a time limit on financing contingency..


     The deadline will expire in 6 days.

    0Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    2y
    Quote from @Barbara Berta:
    Quote from @Russell Brazil:

    Did your financing contingency specify a certain amount of days? And if so Did you blow through that number of days or did you provide the financing denial letter before those days expired?

    If you did miss the deadline, why wasn't your agent cognizant of the deadline?

     Yes, and the deadline was April 22, which is 6 days from now.


     Seems pretty straight forward then. If Ohio has them, have your agent file a case with the administrative law judge to get an order to release the funds. 

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  • Barbara Berta
    OP
    Member since 2023 · 30 posts · 28 votes
    2y
    Quote from @Russell Brazil:
    Quote from @Barbara Berta:
    Quote from @Russell Brazil:

    Did your financing contingency specify a certain amount of days? And if so Did you blow through that number of days or did you provide the financing denial letter before those days expired?

    If you did miss the deadline, why wasn't your agent cognizant of the deadline?

     Yes, and the deadline was April 22, which is 6 days from now.


     Seems pretty straight forward then. If Ohio has them, have your agent file a case with the administrative law judge to get an order to release the funds. 


     The seller is actually a brokerage/realtor. I just researched them and they have a really bad reputation...

    0Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    2y
    Quote from @Barbara Berta:
    Quote from @Russell Brazil:
    Quote from @Barbara Berta:
    Quote from @Russell Brazil:

    Did your financing contingency specify a certain amount of days? And if so Did you blow through that number of days or did you provide the financing denial letter before those days expired?

    If you did miss the deadline, why wasn't your agent cognizant of the deadline?

     Yes, and the deadline was April 22, which is 6 days from now.


     Seems pretty straight forward then. If Ohio has them, have your agent file a case with the administrative law judge to get an order to release the funds. 


     The seller is actually a brokerage/realtor. I just researched them and they have a really bad reputation...


     Was that not disclosed up front? Makes the task for your agent even easier if they didn't disclose that fact.

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  • Barbara Berta
    OP
    Member since 2023 · 30 posts · 28 votes
    2y
    Quote from @Russell Brazil:
    Quote from @Barbara Berta:
    Quote from @Russell Brazil:
    Quote from @Barbara Berta:
    Quote from @Russell Brazil:

    Did your financing contingency specify a certain amount of days? And if so Did you blow through that number of days or did you provide the financing denial letter before those days expired?

    If you did miss the deadline, why wasn't your agent cognizant of the deadline?

     Yes, and the deadline was April 22, which is 6 days from now.


     Seems pretty straight forward then. If Ohio has them, have your agent file a case with the administrative law judge to get an order to release the funds. 


     The seller is actually a brokerage/realtor. I just researched them and they have a really bad reputation...


     Was that not disclosed up front? Makes the task for your agent even easier if they didn't disclose that fact.


    It was disclosed that the agent has ownership interest in the deal and he also has a relationship with the title company.

    0Reply
  • V.G JasonPro Member
    Investor · Member since 2022 · 3k+ posts · 3k+ votes
    2y

    Out them on here. Nothing  like negative press to make someone move. 

    4Reply
  • Barbara Berta
    OP
    Member since 2023 · 30 posts · 28 votes
    2y
    Quote from @V.G Jason:

    Out them on here. Nothing  like negative press to make someone move. 


     There is actually a topic about them in BP. Everyone says to stay away from their company. I wait one more day, I hope he will change his mind, if not, I am happy to disclose names...

    2Reply
  • Zeke Liston
    Real Estate Agent · Columbus, OH · Member since 2018 · 1k+ posts · 1k+ votes
    2y
    Quote from @Barbara Berta:

    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. 

    1. 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!


    Unfortunately, there isn't really anything you can do here. It's a shame the seller is acting this way. You may be best trying to settle to split the EMD so it doesn't sit in escrow forever.

    0Reply
  • Richard Chover
    Investor · Wildomar, CA · Member since 2017 · 12 posts · 11 votes
    2y

    @Barbara Berta

    Doing a 30 min. consult with a Real Estate Attorney will probably be well worth the cost.  There may be some legal and title complexities that arise if there is an open escrow and they sell the property to someone else after you.

    Personally, when faced with a similar situation regarding the release of an EMD I made it clear I would not budge, even if it meant the money sat in an escrow account for years... they eventually conceded.
     

    1Reply
  • Lynn McGeein
    Real Estate Agent · Virginia Beach, VA · Member since 2012 · 2k+ posts · 1k+ votes
    2y

    @Barbara Berta if it's clear in the contract that you're within the financing contingency and were denied, and it states your EMD is returned if that happens, then if agent/broker is not signing the release, I'd also file a complaint with the real estate board.

    1Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    2y
    Quote from @Lynn McGeein:

    @Barbara Berta if it's clear in the contract that you're within the financing contingency and were denied, and it states your EMD is returned if that happens, then if agent/broker is not signing the release, I'd also file a complaint with the real estate board.


    especially if the broker is holding the deposit.
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  • Caleb Brown
    Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
    2y

    Seems to be the agent/seller is trying to bully you. Stay strong and go through legal action if necessary. They might get away with it on most but be that squeaky wheel. I know a few agents in my area that I avoid because they try and do things like this 

    1Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    2y
    Quote from @Caleb Brown:

    Seems to be the agent/seller is trying to bully you. Stay strong and go through legal action if necessary. They might get away with it on most but be that squeaky wheel. I know a few agents in my area that I avoid because they try and do things like this 


    most all RE contracts these days have mandatory mediation.. so no need to lawyer up if you dont want to.. there is a fee for mediation but thats where 99% of EMD squabbles go and get settled.
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  • Caleb Brown
    Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
    2y
    Quote from @Jay Hinrichs:
    Quote from @Caleb Brown:

    Seems to be the agent/seller is trying to bully you. Stay strong and go through legal action if necessary. They might get away with it on most but be that squeaky wheel. I know a few agents in my area that I avoid because they try and do things like this 


    most all RE contracts these days have mandatory mediation.. so no need to lawyer up if you dont want to.. there is a fee for mediation but thats where 99% of EMD squabbles go and get settled.

     That's true. Hopefully reporting to the board will do the trick

    1Reply
  • Steve K.
    Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
    2y

    You've gotten good advice here but one other thing to look into is what leverage you may have in terms of tying up the property if the seller does not release EM to you. Look into whether or not they can execute a sale with the next buyer, while there is an ongoing EM dispute with you. Depending on the specific details and the local laws, they may not be able to sell the property until you have resolved the issue. 

    2Reply
  • Marcus Auerbach
    Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
    2y

    Yup, until a CAMR Cancelation and Mutual Release is signed you are under contract and hold equitable title - they can't sell it to anyone else. At least in Wisconsin.

    It is tough for a seller to go back to market having to explain there is nothing wrong with the house, it was financing etc, and therefore not uncommon to try to negotiate EM, especially if the case is not clear. 

    But 25% is bold. After attorneys get involved, parties usually settle for something like 50/50. And the cost of attorneys on both sides exceeds the 5k EM usually.. So as long as they are thinking rationally, both parties have an interest in working this out..

    The way to escalate is usually to go to their broker, if that does not work file a complaint with their state board. Make sure the denial letter was delivered correctly. I would respond equally bold, up the pressure and make sure they understand you are not a pushover.

    2Reply
  • Barbara Berta
    OP
    Member since 2023 · 30 posts · 28 votes
    2y

    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. 

    0Reply
  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 17k+ votes
    2y
    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 😊 

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  • Barbara Berta
    OP
    Member since 2023 · 30 posts · 28 votes
    2y


     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 😊 

    Lot’s of valuable info here, thanks a lot! This is the exact path I’ll follow! I won’t give in that’s for sure because I worked so hard on this deal to make it work, so it’s absolutely not my fault! He has no grounds for this…. 

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  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    2y
    Quote from @JD Martin:
    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 😊 

    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.
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  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 17k+ votes
    2y

    The agent/broker is selling their own home is what I believe I read in the thread, so they are refusing to release the funds. Maybe I read it wrong - OP is the seller and the broker one and the same?

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  • Adam BartomeoBusiness Member
    Real Estate Broker · Cape Coral, FL · Member since 2015 · 2k+ posts · 1k+ votes
    2y

    So, we have dealt with this before but only in Florida and its a bit of a pain in the butt when both parties won't sign the release and cancellation. According to the information in this thread, the broker isn't doing anything where the dept of RE or the association would do much. When we have dealt with this we were made aware that it is a civil matter where you would have to file with the courts. $5,000 isn't worth hiring a lawyer so you should file it in small claims court. As long as you have your ducks in a row you will win. If escrow is being held by a title company, then with the court order they will be compelled to release the funds to you. You are probably looking at a 2 - 4 month process as the courts will force you to go to mediation first.

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