Lost my earnest, lost the deal. Buyer walks away un-scathed!! :-(

28 Replies

Today I learned a hard lesson. I thought I had a deal done. All cash offer on full asking price. Purchase agreement was signed. Earnest money was to be deposited with my Broker. Instead, the buyers agent said, "its normal here that the title company escrow the earnest money, I will drop it off with XYZ company, they are good".  By the time I got back to her she said she had taken the money to the title company, even though my purchase agreement clearly stated that the Sellers Broker (me) would escrow the check. Fast forward 8 days of calls to the agent and said title company , trying to be calm and work with her, and trying to confirm the check arrived.  No check!   I finally get ahold of the agent today and she said the buyer had walked the property and has now decide he does to want to buy the land! 

BTW, there was no inspection contingency so in my opinion this was trespassing. But I am no lawyer. Next I called the title company as in my opinion, the buyer lost his earnest money right!? I wanted them to cut me a check in the name of my broker and send it over immediately.  Only to find out the buyer agent told the title company the deal fell through and they gave the check back to the agent. So now what do I do? I cannot just make him send me a check??

Lesson learned going forward. Sign purchase agreement and get the check my self at the signing. No relying on any other agents. Now I have to explain this to my seller. Not going to be happy.

Isn't it standard in most contracts that EMD cannot be dispersed or returned to either side of the transaction after a purchase agreement has been signed unless a contract release form has been signed by both parties? I'm not a lawyer, no legal advice, and don't know your state's rules, but shouldn't the title company have a duty to ensure both sides agree the deal is off before returning any funds to either side?

Yep, seen it a bunch of times.  And I don't accept checks of any kind. Wire transfers only.  Another reason I insist on my broker holding the EM....in the event of a deposit dispute a title co. canNot make a decision, you have to go to court.  In Florida, a broker can get a determination from FREC, with both parties submitting a letter stating their case, then the Broker cuts the check as per FREC decision.

Edit:  looks like I misread it.  They Did give a check to the title co., then the title co. gave it back without a release?  Did the title co. have a copy of the signed contract?  Me thinks the title co. has a problem.  Go get em!

Title company got my purchase agreement which states the Seller broker (my company) will take the EM.  

They got EM from the buyers agent, it was written to the title company.  

I am not getting a real clear picture from the title company but I am under the impression that they gave it back to the agent, or at least want to.  Then, I did get a WB-45 "Cancellation Agreement and Mutual Release".   Buyer agent wants me to get the seller to sign this which will then release the $2000 back to buyer which tells me they still have the check  I was lied to I think.  I think the title company is in bed with this agent she has been around for 18 years.  They want to keep her business.    

So, I suspect the title company has the earnest money written to them.  I am requesting they cut a check to my broker.  They want me to just sign the WB45 mentioned above and just walk away.  My broker is saying just let it go.  Thoughts?

From a practical point of view, does the buyer have any outs in the contract....inspection, financing, etc.?  If so, they can simply cancel the contract anyway.  If they have No contingencies, then seller should keep it.

Was your purchase agreement in escrow? Did the funds actually clear? What does the WI PA say regarding canceling and EM funds. Does the buyer get 3 days to change their mind? The fact that escrow "returned the check" is not good. It means the buyer changed their mind within a day or two. Or you have a sloppy escrow agent. EMD should be deposited and cleared or wired asap. There should be no check to return (unless WI law has a cancel period).

No escrow agent here would ever return cleared EMD without both parties consenting. Too much liability.

I track EMD like a hawk. I wire my own funds the same or next day when I'm the buyer. And I cancel on buyers who don't wire or drive over certified funds in 3 days. I have no time for that nonsense. Lots of wholesalers out there these days with no EMD, happy to market your property and find a buyer with EMD. I'm ok with this if they actually have a buyer...... but they have to live up to what they signed in writing......depositing EMD into escrow. The other issue is buyers with HMLs who say they have cash but hope I don't notice when they fail to deposit EMD. I notice.

Originally posted by @Neil Hauger :

 I think the title company is in bed with this agent she has been around for 18 years.  They want to keep her business.    

Get over that.  Agents and escrow have a very tight relationship.  Regardless, escrow and title companies are professional fiduciaries.  They either handle funds correctly per the purchase agreement and state law or they don't.  Where's the paper trail?  

Im new but in Wisconsin, I do not think PA's go into escrow in this state.  

I got two different stories from the title company from two different people but as far as I know the check got there on Monday.  It was written to the title company.  My PA says it needed to go to my broker and I was directing them to do so.  The Agent was radio silent for 4 days which got me suspicious.  I think the buyer was backing out, she was afraid to tell me and was trying to save the deal.  

According to the contract Acceptance occurs when all buyers and seller have signed one copy of the offer to purchase.  That was done.  Binding acceptance was to happen by April 23 when a copy of the accepted offer was delivered by mean directed and agreed to.  That was done.  

Again, I am not sure if the check was returned, they said that but when I questioned them on that statement saying they did not have the right to return anything, the subject was changed and they misdirected and the circle talk began.  My suspicion is it is still there.  I will call tomorrow to confirm.  

Boil it all down, I think my seller is entitled to the earnest, they are trying to get me to sign the WB45 Mutual cancellation mutual release.  so then the EM goes back to the buyer.  But, my broker is also wanting me to just let it go.  It doesn't feel right to me as I have obligations to my seller.  IMO

BTW, there was no contingencies.  Cash offer, full asking price.  This is a Vacant land purchase for what it is worth.  

@Neil Hauger

- The only thing I would be "letting go" is my agent. They represent you not your buyer and not the title co. YOU - Sounds like you may need to remind them. I'm in agreement with you (and your gut/God Conscience). The seller deserves that EMD. Assuming you have EMD with the seller you may need the buyer's EMD to CYA and make the seller "whole". Consult an attorney if needed.

So you're the agent? Did your seller lose other buyers because this buyer changed their mind? Were there actually any damages? Don't go after EMD on principal. EMD is so the buyer can show commitment to the seller and to compensate the seller for taking the property off the market if it doesn't work out. It's not a source of income. Let it go.

Originally posted by @Ibrahim Hughes :

@Neil Hauger

- The only thing I would be "letting go" is my agent. They represent you not your buyer and not the title co. YOU - Sounds like you may need to remind them. I'm in agreement with you (and your gut/God Conscience). The seller deserves that EMD. Assuming you have EMD with the seller you may need the buyer's EMD to CYA and make the seller "whole". Consult an attorney if needed.

Really? 8 days off the market. The agent was unable to get verification of the EMD and then failed to cancel the PA when he did not. Should we be advising his client to find a new agent? Vacant land EMD in a probably not hot market. Really?

I will be calling the Wisconsin Realtors Association Legal Hotline tomorrow.  I think my seller is due this EM.  Even though my broker wants me to just walk away, I think I need to hear the lawyers opinion on this.  Thanks all, good lesson learned.  I need to look into wiring of funds next time.  Needs to happen fast like 24 hours. and I will have the contract language reflect that.  Second, I will ask for more.  If a buyer wants to back out, its gotta hurt.  Is there a common practice?  This was a $330,000 purchase of land.  Maybe 10%?

going to bed.  Thanks.  

Originally posted by Kristine Marie Poe:
Originally posted by @Ibrahim Hughes:

@Neil Hauger

- The only thing I would be "letting go" is my agent. They represent you not your buyer and not the title co. YOU - Sounds like you may need to remind them. I'm in agreement with you (and your gut/God Conscience). The seller deserves that EMD. Assuming you have EMD with the seller you may need the buyer's EMD to CYA and make the seller "whole". Consult an attorney if needed.

Really? 8 days off the market. The agent was unable to get verification of the EMD and then failed to cancel the PA when he did not. Should we be advising his client to find a new agent? Vacant land EMD in a probably not hot market. Really?

Somehow I read the original poster's comments as coming from the perspective of a wholesaler. Sorry but was answering some other posts on wholesaling so I was stuck in that mode. I now see that his 'Broker' was the Broker of record he reps as an agent. Honestly, I would leave it TOTALLY up to his client to make the call as she will be the one who will be frustrated (which brings on stress) over this (not to mention the stress caused to the OP over the last 4-8 days). But I do operate off of principal. And I don't like buyers running around, making BS promises and tying up properties while not communicating with me that they changed their mind. So personally if *I* was the seller, I'd have a problem returning the EMD. You can't make promises in writing and then simply request a do over without AT LEAST calling me (you or your agent) and being professional and respectful enough to explain where your mistake was. The OP works FOR the seller. It should be the seller's call in the end.

2% earnest deposit. I would never give a 10% nonrefundable deposit.

Cash deals, we do 10%.  Otherwise, they're not serious buyers.

Originally posted by @Ibrahim Hughes :
Originally posted by @K. Marie Poe:
Originally posted by @Ibrahim Hughes:

@Neil Hauger

- The only thing I would be "letting go" is my agent. They represent you not your buyer and not the title co. YOU - Sounds like you may need to remind them. I'm in agreement with you (and your gut/God Conscience). The seller deserves that EMD. Assuming you have EMD with the seller you may need the buyer's EMD to CYA and make the seller "whole". Consult an attorney if needed.

Really? 8 days off the market. The agent was unable to get verification of the EMD and then failed to cancel the PA when he did not. Should we be advising his client to find a new agent? Vacant land EMD in a probably not hot market. Really?

Somehow I read the original poster's comments as coming from the perspective of a wholesaler. Sorry but was answering some other posts on wholesaling so I was stuck in that mode. I now see that his 'Broker' was the Broker of record he reps as an agent. Honestly, I would leave it TOTALLY up to his client to make the call as she will be the one who will be frustrated (which brings on stress) over this (not to mention the stress caused to the OP over the last 4-8 days). But I do operate off of principal. And I don't like buyers running around, making BS promises and tying up properties while not communicating with me that they changed their mind. So personally if *I* was the seller, I'd have a problem returning the EMD. You can't make promises in writing and then simply request a do over without AT LEAST calling me (you or your agent) and being professional and respectful enough to explain where your mistake was. The OP works FOR the seller. It should be the seller's call in the end.

Yeah, I might advise the seller to attempt to keep some or all of the EMD if I the funds were where I think they should be.....in escrow.....and we could get the buyer to agree to release some or all of it and cancel the contract. But there is no EMD to release at this point. 8 days off the market and no cleared funds in escrow......doesn't seem like much to work with. But that's me.

Originally posted by @Wayne Brooks :

Cash deals, we do 10%.  Otherwise, they're not serious buyers.

You're an agent so you've seen way more. Indeed I've never had a buyer cancel with real EMD in escrow ($10K or more). The only two times I kept EMD, it was from buyers who truly wasted my time. And they knew it and signed off and it was released it to me. But it was less than $2500.00.

Originally posted by @Casey Miles :

2% earnest deposit. I would never give a 10% nonrefundable deposit.

Never say never. If you are an active buyer for long enough, you'll put up real money to get a deal. Especially a screaming deal in a competitive market. I've had buyers put 100% into escrow after signing the PA.   If you know what you are doing you are not worried about getting it refunded because you know you're going to buy it as soon as escrow can complete the paperwork!   

@Neil Hauger I don't know the laws or rules for your state. I would call the Real Estate Commission for your state. I would report this incident to the National Association of Realtors. This is clearly an ethics issue and there seems to be fraudulent activities. 

Generally speaking if the buyer walks away there has to be a release of funds signed by all parties. In your state is there a rescission period for real estate transactions?

Was the contract fully ratified? Did everyone receive a copy. Part of a binding contract is acknowledgement (signature)  and acceptance (you and the buyer received a fully ratified copy). 

Hope this helps.

I've not seen an offer with no contingencies in a very long time.  As a buyer I'd never do that, as a seller I'd question the validity of the offer, and as an agent I would never advise a buyer to make such an offer.

If it were me I'd be looking back through the deal to see if I missed something  

Blair Poelman, Broker in Utah (#9299425)

So, I see a few things working here and I'll talk in generalities since every state is different.

First, it is your Seller's decision about what they want to do with the EM. Not yours, not your Brokers, or the Title Companies; your seller is going to have to hire an attorney and fight for that $2k if they want it. Second, if your Broker is advising you to advise your Seller to let it go, then you need to get your butt on the phone and advise the Seller EXACTLY how your broker told you to; more than likely their agreement is with the Broker and not you and the Broker is responsible for your activities. Finally, as far as I know, title companies in almost every state are regulated by that states department of insurance; if they cut a check without all parties signing off on it, file a complaint with that department and they will investigate.

Now my personal opinion, there is something missing here. A cash buyer is smart enough to know how contracts work and to maneuver within them, I agree a ZERO contingency contract is rare. You and your seller appear to be wanting EM based on principal and not actual damages, which you will lose in a court room regardless of what the contract says. Cut your losses, get it back on the market, and move on. Your seller will spend more than the amount of the EM just fighting to get it.

Originally posted by Kristine Marie Poe:
Originally posted by @Casey Miles:

2% earnest deposit. I would never give a 10% nonrefundable deposit.

Never say never. If you are an active buyer for long enough, you'll put up real money to get a deal. Especially a screaming deal in a competitive market. I've had buyers put 100% into escrow after signing the PA.   If you know what you are doing you are not worried about getting it refunded because you know you're going to buy it as soon as escrow can complete the paperwork!   

 I guess I'm not active enough...

Too rich for my blood on a no contingency/nonrefundable deal.

1.  A deal is never done until the proceeds are in your hand.  A contract is only as good as the parties involved. 

2.  There should never be confusion as to who, when, where and what each party's obligations are. If there is confusion, the contract is incomplete.  

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