Seller is refusing to sign Earnest money release form

Buying & Selling Real Estate

Seller is refusing to sign Earnest money release form

Investor · Katy, TX · Member since 2015 · 69 posts · 8 votes

I am in State of Texas and we signed TREC Contract.

In Section 7.B.2, we checked the box and the contract is executed, earnest money was left with title company. the text in that contract is below.

Buyer has not received the notice. Within 5 days after the effective date of the contract, Seller shall deliver the notice to the Buyer.If Buyer does not receive the Notice, Buyer many terminate this contract. if Seller delivers the notice, Buyer may terminate this contract for any reason within 7 days after the Buyer receives the Notice or prior to the closing, whichever first occurs, and the earnest money will be refunded by the Buyer.

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I am a Buyer in the contract and within 7 days after I receive the Seller's Disclosures, I provided the signed 'Notice to Terminate Contract' to Seller's agent through my agent; requested them to sign the 'Release of Earnest Money' form.

After a week of postponing the signatures, we heard from the Seller's agent today stating that they need a portion of the Earnest money to sign the release form or else they state that they do not sign.

I believe the first step from my side is to send them a notice to sign through Title company and will wait 15 days for their response. please help me understand what should I do in terms of hiring an attorney or just need to wait for Seller's response after we send the notice through Title company?

First of all do the Title company need such form to be signed by Seller to release Earnest money as I gave the 'Notice to terminate' form?

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Investor · Corpus Christi, TX · Member since 2012 · 2k+ posts · 1k+ votes

10y

Title companies in Texas can hold the disputed amounts up to a two years. Fortunately, Justice of the Peace Courts (the "People's Court") handle amounts up to $10K so it's pretty easy to file an action for less than $150 and it can usually be resolved in less than 60 days. A title company won't release disputed funds without a finding by the JP Court. Been there, done that.

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Account Closed
Real Estate Agent · Las Vegas, NV · Member since 2015 · 2k+ posts · 1k+ votes
10y
Dont you have an agent? The property is in escrow so the seller cannot sell the property so it sounds like a stalemate.What was the amount of the funds they wanted to withhold? Did your agent file all the proper forms?
Texas law
Where a buyer has a right to notify the seller that the contract is terminated under any provision of the contract, you should use the Notice of Buyer's Termination of Contract (TAR 1902). This form was designed to combine the notices of two prior TREC forms and to add a reference to several other paragraphs or addenda where the buyer can notify the seller that the contract is terminated. This form was promulgated by TREC with a mandatory use date of Sept. 1, 2008. - See more at: https://www.texasrealestate.com/for-texas-realtors...
0 Reply
John Thedford
Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
10y
Does your agent have documentation they submitted the request to terminate--and timely? If so, I don't know who you would approach. I suggest your agent's broker mails a demand letter for a full refund and document everything. This sounds like it could be an unreasonable and illegal action...but that never stopped anyone from acting that way!
0 Reply
Kevin Harrison
Investor · Woodbridge, VA · Member since 2015 · 476 posts · 197 votes
10y
I'm pretty sure that illegal, but I'm no lawyer. Make sure you have all your documentation in order, and let them know that you will be contacting a lawyer if they do not fork over the earnest money. Make sure you get all correspondence with them in writing from here on out in case you do have to take this to court.
0 Reply
Wayne Brooks
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
10y
Title co.s don't make these decisions. Without the executed releases, they won't distribute the EM.
1 Reply
Bhanu P.
OP
Investor · Katy, TX · Member since 2015 · 69 posts · 8 votes
10y
Thank you @Wayne Brooks
0 Reply
Nicole Garner
Real Estate Broker · Houston, TX · Member since 2015 · 86 posts · 22 votes
10y
The key to your claim is going to be the timeliness and manner in which your agent delivered your termination notice to the seller's agent. The Texas Association of Realtors has covered this scenario.
My buyer gave the seller a timely, written notice that she’s terminating the contract under the termination option in Paragraph 23 of the One to Four Family Residential (Resale) contract. The seller is upset and won’t sign the TAR Release of Earnest Money form. What can my buyer do to get her earnest money? (updated Feb. 20, 2015)
Under the provisions of Paragraph 18 of the contract, your client could make a written demand to the escrow agent that the earnest money be released. As long as the seller doesn’t object in writing to that disbursement within 15 days after the escrow agent provides a copy of your client’s demand to the seller, the escrow agent may release the funds to your client. Following these steps for disbursement releases the escrow agent from liability related to the disbursement.
If the seller does make a written objection to the disbursement, or his own written demand for the earnest money, the buyer will have written evidence to substantiate the seller’s wrongful refusal to release the earnest money. This might make it easier for the buyer to recover the liquidated damages stated in Paragraph 18:
-Three times the amount of the earnest money
-The earnest money-
-Reasonable attorney fees
-All costs of suit.
Although the amount of earnest money involved in any given transaction may not be substantial, a party who wrongfully fails or refuses to sign a release could end up liable for more than just the amount of the earnest money held by the escrow agent.
- See more at: https://www.texasrealestate.com/for-texas-realtors...
Good luck @Bhanu P.
2 Reply
Guy Gimenez
Investor · Corpus Christi, TX · Member since 2012 · 2k+ posts · 1k+ votes
10y
YOU should have delivered Notice of Termination of Contract directly to the seller in the manner allowed in para. 21. Your agent "should" have delivered the notice directly to the seller as well and your agent's failure to do so in a timely manner will likely place some liability on the brokerage, but that will be another matter altogether.
Bottom line is that IF you or your agent delivered the notice directly to seller within the 7 days after you received the Disclosure, you have the statutory right to terminate the contract. The real issue will be proving the notice was delivered as required.
2 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
@Bhanu P. not sure in Texas but in most states if its a stalemate the title company files an interpleader with the court and sends the EM there... then its up to you to file a motion to get the money IE basically litigate for it.. and of course the cost of this far exceeds the normal small EM.... Not sure if small claims court would handle this though.
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0 Reply
Guy Gimenez
Investor · Corpus Christi, TX · Member since 2012 · 2k+ posts · 1k+ votes
10y
@Jay Hinrichs
Title companies in Texas can hold the disputed amounts up to a two years. Fortunately, Justice of the Peace Courts (the "People's Court") handle amounts up to $10K so it's pretty easy to file an action for less than $150 and it can usually be resolved in less than 60 days. A title company won't release disputed funds without a finding by the JP Court. Been there, done that.
5 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
@Guy Gimenez Thanks Guy that's GREAT info for anyone in this situation no need to waste a bunch of money on a Lawyer pay the 150 go to small claims show your contract to the judge and if your right you get a ruling in your favor.
I had a timber harvest contract one time just my simple one pager.. and the client decided not to honor it.. I took them to small claims for at the time 5k minimum. My assertion was that we spent money on a cruise and scheduled our crews etc etc.. And the owner just decided they did not want to harvest ... .Judge gave us a 5k judgement owner cut me a check right there ( he was not happy) but I was glad to see the Judge uphold contracts
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0 Reply
Bhanu P.
OP
Investor · Katy, TX · Member since 2015 · 69 posts · 8 votes
10y
Originally posted by @Account Closed:

Dont you have an agent? The property is in escrow so the seller cannot sell the property so it sounds like a stalemate.What was the amount of the funds they wanted to withhold? Did your agent file all the proper forms?
Texas law
Where a buyer has a right to notify the seller that the contract is terminated under any provision of the contract, you should use the Notice of Buyer's Termination of Contract (TAR 1902). This form was designed to combine the notices of two prior TREC forms and to add a reference to several other paragraphs or addenda where the buyer can notify the seller that the contract is terminated. This form was promulgated by TREC with a mandatory use date of Sept. 1, 2008. - See more at: https://www.texasrealestate.com/for-texas-realtors...
Thank you @Steven Picker.
Yes, I do have an agent and we provided our notice in proper TREC termination of contract form.
Agent provided it in the email to their Agent on time.
Earnest money is $50,000 and they like to keep $2000.
0 Reply
Bhanu P.
OP
Investor · Katy, TX · Member since 2015 · 69 posts · 8 votes
10y
Originally posted by @John Thedford:

Does your agent have documentation they submitted the request to terminate--and timely? If so, I don't know who you would approach. I suggest your agent's broker mails a demand letter for a full refund and document everything. This sounds like it could be an unreasonable and illegal action...but that never stopped anyone from acting that way!
Thank You @John Thedford
I contacted the title company and they sent the notice to Seller to sign release form or to object.
If Seller do not respond in 15 days, Title company can automatically release Earnest funds.
If Seller objects, Title company can't decide who is right or wrong and at that stage, it would be arbitration or legal issue that we got to deal with.
0 Reply
Bhanu P.
OP
Investor · Katy, TX · Member since 2015 · 69 posts · 8 votes
10y
Originally posted by @Kevin Harrison:

I'm pretty sure that illegal, but I'm no lawyer. Make sure you have all your documentation in order, and let them know that you will be contacting a lawyer if they do not fork over the earnest money. Make sure you get all correspondence with them in writing from here on out in case you do have to take this to court.
Thank you @Kevin Harrison
We are keeping all the communication in email and I believe in the State of Texas, electronic communication is valid form of legal communication in this nature of transactions.
0 Reply
Bhanu P.
OP
Investor · Katy, TX · Member since 2015 · 69 posts · 8 votes
10y
Originally posted by @Nicole Garner:

The key to your claim is going to be the timeliness and manner in which your agent delivered your termination notice to the seller's agent. The Texas Association of Realtors has covered this scenario.
My buyer gave the seller a timely, written notice that she’s terminating the contract under the termination option in Paragraph 23 of the One to Four Family Residential (Resale) contract. The seller is upset and won’t sign the TAR Release of Earnest Money form. What can my buyer do to get her earnest money? (updated Feb. 20, 2015)
Under the provisions of Paragraph 18 of the contract, your client could make a written demand to the escrow agent that the earnest money be released. As long as the seller doesn’t object in writing to that disbursement within 15 days after the escrow agent provides a copy of your client’s demand to the seller, the escrow agent may release the funds to your client. Following these steps for disbursement releases the escrow agent from liability related to the disbursement.
If the seller does make a written objection to the disbursement, or his own written demand for the earnest money, the buyer will have written evidence to substantiate the seller’s wrongful refusal to release the earnest money. This might make it easier for the buyer to recover the liquidated damages stated in Paragraph 18:
-Three times the amount of the earnest money
-The earnest money-
-Reasonable attorney fees
-All costs of suit.
Although the amount of earnest money involved in any given transaction may not be substantial, a party who wrongfully fails or refuses to sign a release could end up liable for more than just the amount of the earnest money held by the escrow agent.
- See more at: https://www.texasrealestate.com/for-texas-realtors...
Good luck @Bhanu P.
Thank you @Nicole Garner
I wish Seller will release Earnest money soon so that I do not have to spend my energy on legal issues.
0 Reply
Bhanu P.
OP
Investor · Katy, TX · Member since 2015 · 69 posts · 8 votes
10y
Originally posted by @Guy Gimenez:

YOU should have delivered Notice of Termination of Contract directly to the seller in the manner allowed in para. 21. Your agent "should" have delivered the notice directly to the seller as well and your agent's failure to do so in a timely manner will likely place some liability on the brokerage, but that will be another matter altogether.
Bottom line is that IF you or your agent delivered the notice directly to seller within the 7 days after you received the Disclosure, you have the statutory right to terminate the contract. The real issue will be proving the notice was delivered as required.
Thank you @Guy Gimenez
Buyer's agent emailed the notice to Seller's agent in a timely manner and burden to prove this can be easy as we did everything in the email (we received the disclosures in the email too).
0 Reply
Bhanu P.
OP
Investor · Katy, TX · Member since 2015 · 69 posts · 8 votes
10y
Originally posted by @Jay Hinrichs:

@Bhanu P. not sure in Texas but in most states if its a stalemate the title company files an interpleader with the court and sends the EM there... then its up to you to file a motion to get the money IE basically litigate for it.. and of course the cost of this far exceeds the normal small EM.... Not sure if small claims court would handle this though.
Thank you @Jay Hinrichs
I am not sure if it is stalemate for the Seller due to this EM litigation. I need to talk to title company on this.
EM is $50,000 and small claims court do have $10,000 limit in Texas.
0 Reply
Harriett Williams
Clerical · Charlotte, NC · Member since 2015 · 7 posts · 0 votes
10y
You need real legal advice. Have you talk to a Real Estate Broker in TX?
0 Reply
Bhanu P.
OP
Investor · Katy, TX · Member since 2015 · 69 posts · 8 votes
10y
Originally posted by @Guy Gimenez:

@Jay Hinrichs
Title companies in Texas can hold the disputed amounts up to a two years. Fortunately, Justice of the Peace Courts (the "People's Court") handle amounts up to $10K so it's pretty easy to file an action for less than $150 and it can usually be resolved in less than 60 days. A title company won't release disputed funds without a finding by the JP Court. Been there, done that.
Thank you again @Guy Gimenez
EM in this transaction is $50,000 and small claims court is not an option.
0 Reply
Bhanu P.
OP
Investor · Katy, TX · Member since 2015 · 69 posts · 8 votes
10y
Originally posted by @Harriett Williams:

You need real legal advice. Have you talk to a Real Estate Broker in TX?
Thank you @Harriett Williams
No I have not spoken to one yet but I scheduled a telephonic appointment with the Attorney in the title company who is familiar with disputes of this sort.
0 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
@Bhanu P. OK then yes you want to make sure your dates and delivery of your notice to cancel is bullet proof.. and then if they still won't sign then no choice but to litigate.. I am not sure about TREC contracts but our Oregon Real estate contracts call for mandatory non binding mediation and 99% of problems are handled very quickly and for much less than a full blown legal battle.. Good mediators do a nice job settling these things as long as everyone gives a little.. If one side won't give an inch then its usually a full blown trial. which of course is in our neck of the woods 20 to 50k from start to finish an if its a complicated litigation could be staggeringly more money.. not sure in Texas but our attorneys in these parts are 300 to 500 an hour
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0 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y
@Bhanu P. PS I would be super pissed in your situation if an agent bungled the delivery as long as you did what you should have done in your time lines.
5k and under I just would not get worked up... but over that amount and certainly 50 large would get me all fired up as well.
For some of my bigger transaction I have used indepenndant escrow agents separate from title company and used unilateral escrow instructions that slant the transaction my way.. ERGO if I don't approve in writing on a certain day the EM is automatically realesed back to me.
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0 Reply
Guy Gimenez
Investor · Corpus Christi, TX · Member since 2012 · 2k+ posts · 1k+ votes
10y
@Bhanu P.
Again, if you sent the Notice of Termination to the seller's agent, you did not meet the requirements under paragraph 21 which states that all Notices will be delivered to Seller (vs. Seller's Agent) in the manner provided under that paragraph.
There are still many unknowns in this scenario so instead of wasting time getting advice from folks here who don't have a dog in the hunt and who haven't seen actual evidence of your position, you should seek the advice of competent counsel so you know where you stand from a legal perspective.
0 Reply
Shadonna N.
Developer · . · Member since 2014 · 520 posts · 162 votes
10y
Why does the seller feel they are due 2K? Did they make some improvements as part of one of the contingencies, reimbursement for opportunity lost since it was under contract, or something like that?
0 Reply
Bhanu P.
OP
Investor · Katy, TX · Member since 2015 · 69 posts · 8 votes
10y
@Jay Hinrichs
We do have disclosures email on 12/08 and we sent them terminate notice on 12/14 (6 days).
We did this communication in the email and hence proving can be easy. From what I see from Seller's point of view is they are disappointed on this termination notice from me. This SFR property is in the market for more than an year in a hot market.
They initially listed for around $200K and the contract price that we agreed is $150K (yes, they overpriced it and hence not able to sell).
During this 1 year, they reduced price multiple times and when they got my offer they might have relieved from the pressure of owning this vacant property; when I terminated the property they are not so happy with the result.
As far as I am concerned, during the due diligence process, I felt that I might be paying more that what I "should" pay and I like to terminate the contract since I do have the option to do so per the contract. Have to see their response now since we sent them notice through Title company.
0 Reply
Guy Gimenez
Investor · Corpus Christi, TX · Member since 2012 · 2k+ posts · 1k+ votes
10y
@Jay Hinrichs
TREC forms don't contain binding arbitration...a problem I simply cannot understand and an issue that I address in my deals by adding a B/A agreement into an Exhibit which I incorporate into my contracts. Only had to use B/A once and other party didn't even participate because she knew she had no legal grounds to push back...I prevailed in arbitration and got a judgement against the agent of which I've collected the majority.
1 Reply

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