How do I request my broker to refund my good faith deposit?

17 Replies

I've been in the process of bidding on a short sale since October. Today after increasing my offer 4 times my broker said the bank has declined my offer once again. So I've finally decided to walk away. 

I have a $1000 good faith deposit with the broker and today he told me that he'll speak to his supervisor to see if he can get it me a refund. I don't understand why that would even be a questionable thing as I've been earnestly seeking to make this deal happen. 

Any comments, suggestions would be appreciated.

I was also thinking of writing a formal request in addition the the phone request I made today. Something like this: 

"Hi ____,

I'm writing this email to make a formal request for the refund of my good faith deposit.

I believe that I am entitled to a refund of my entire good faith deposit of $1000. Since October, we wrote 3 contracts, four if you include the amendment of the 3rd. We increased our offer price four times, starting from a price you suggested and finally stopping at 12% below bank appraisal which I believe was a reasonable offer. I did not reneged on any of those contracts and exhibited my good faith in both compliance to your requests and consistent follow ups. "

@Behrooz K. Your money should be refunded without question.  

The brokerage most likely has a form for you to fill out that gives them a paper trail.  If there's any more friction than that, you should send them a certified letter demanding that your funds be returned immediately.

Mishandling client funds is a fast way for a broker to lose their license.

Charlie MacPherson, Real Estate Agent in MA (#9532146)
781-412-4151
Originally posted by @Behrooz K. :

I've been in the process of bidding on a short sale since October. Today after increasing my offer 4 times my broker said the bank has declined my offer once again. So I've finally decided to walk away. 

I have a $1000 good faith deposit with the broker and today he told me that he'll speak to his supervisor to see if he can get it me a refund. I don't understand why that would even be a questionable thing as I've been earnestly seeking to make this deal happen. 

Any comments, suggestions would be appreciated.

I was also thinking of writing a formal request in addition the the phone request I made today. Something like this: 

"Hi ____,

I'm writing this email to make a formal request for the refund of my good faith deposit.

I believe that I am entitled to a refund of my entire good faith deposit of $1000. Since October, we wrote 3 contracts, four if you include the amendment of the 3rd. We increased our offer price four times, starting from a price you suggested and finally stopping at 12% below bank appraisal which I believe was a reasonable offer. I did not reneged on any of those contracts and exhibited my good faith in both compliance to your requests and consistent follow ups. "

 Add: "Please return my good faith deposit by Feb 7 2018 to 1234 Main St, Anytown, USA. 

Thank you for your prompt attention to this matter.

Sincerely,

Joe Schmoe

(Your Phone Number)

@Behrooz K. Your deposit should be returned. Without knowing the details of your case, this could also be a way for the brokerage to hold on to the deposit while you work with them on a future deal. Not saying they are doing it this way, but smaller brokerages have been known to use such "pressure" tactics. 

The return of your deposit will be dictated by state law.  Lots of advice here from people not in your state. As someone who does business in multiple states, I can tell you the process can be extremely different from state to state.  In Maryland, if the title company is holding the deposit, and seller refuses to sign a release, the only way to get it back is through court order for instance, so a demand letter for it would do absolutely nothing.

Russell Brazil, Real Estate Agent in Maryland (#648402), Virginia (#0225219736), District of Columbia (#SP98375353), and Massachusetts (#9​0​5​2​3​4​6)
(301) 893-4635

Thank you all for your replies. 

@Russell Brazil this property is in New Jersey not in my home state. If you or anyone have state specific info for NJ it would be greatly appreciated. 

Thanks

Based on what I am hearing and have read here, you should be entitled to your earnest money back.

I have been in same situation in NJ and have had my money returned to me.

regards,

Chris

Originally posted by @Odie Ayaga :

Very interesting @Russell Brazil. Would the seller in your case be required to provide some sort of reasoning as to why they wouldn't release the EMD?

 Nope, they can do it just to be a jerk, and that is usually the case. If the real estate brokerage is holding the deposit in escrow, there is a remedy to the seller not releasing, but they can still block it if they are more active.  With the title company, it is entirely passive their blocking the release.  Some title companies literally have money in escrow from 25 years ago thats never been released.

Russell Brazil, Real Estate Agent in Maryland (#648402), Virginia (#0225219736), District of Columbia (#SP98375353), and Massachusetts (#9​0​5​2​3​4​6)
(301) 893-4635

As Russel said it will depend on your state and the specific situation.  You said this was a short sale, but did you have a 3rd Party Approval contingency in place?

I suggest speaking directly with the broker.  If you don't get a satisfactory answer, or if you feel like you're being jerked around, then elevate the complaint to the NJ Real Estate Commission.

@Joe Norman what is a 3rd party approval contingency? If you mean in the contact, there's nothing in there about refunding the good faith deposit just the amount that will be deposited. 

@Behrooz K. the contract is with the seller. If the seller accepted an offer for less than what they owe on the property, then the seller needs to come up with the difference to close on the property. The seller has two options, either return your earnest money or come up with the cash for closing to satisfy the bank. If the contract was contingent on the bank approving the short sale, then after the bank rejected the price, the contract goes void.

Any way you look at this, it is failure to perform on the contract on the part of the seller. You are entitled to the money, so as others suggested, send a letter with time line for release. If you don't receive the money, take them to small claims court.

Hi @Behrooz K. ,

Is this a EMD check written out for that specific property or is it a "Good faith" check given to the brokerage at the start of you two doing business. Like one when you signed an "exclusive right to represent"? One of those put $1,000 down and when we find something we agree it will come off commissions type deals? If it is the latter, that language and what you signed will dictate your responsibilities in that case. If it is the former, odds are the bank will release it because they are all about crossing T's and dotting I's.

Good Luck!

Mike Cumbie, Real Estate Agent in NY (#10401285310)
Originally posted by @Joe Splitrock :

@Behrooz K. "If the contract was contingent on the bank approving the short sale, then after the bank rejected the price, the contract goes void."

This is what I am referring to regarding whether or not the contract was contingent on 3rd Party Approval.  Was there an addendum to the contract with "Short Sale" or "3rd Party Approval" in the title? As @Russell Brazil pointed out, regardless of whether you are due the deposit or not, it could be difficult to get if the seller and your broker don't want to cooperate.  Sorry to hear you're in such a pickle.

Originally posted by @Joe Norman :
Originally posted by @Joe Splitrock:

@Behrooz K. "If the contract was contingent on the bank approving the short sale, then after the bank rejected the price, the contract goes void."

This is what I am referring to regarding whether or not the contract was contingent on 3rd Party Approval.  Was there an addendum to the contract with "Short Sale" or "3rd Party Approval" in the title? As @Russell Brazil pointed out, regardless of whether you are due the deposit or not, it could be difficult to get if the seller and your broker don't want to cooperate.  Sorry to hear you're in such a pickle.

Maybe the seller needs to release it, but even if they don't release it, they don't get to keep it. Seller has to either perform on the contract or release the funds. Call them twice a day until you get your money.

Typically, if held with the title co. (the RE brokerage usually has other options) they’d want a release signed by both parties. But, with a rejected short sale, the title Gould have no issue releasing but you could likely get a release signed from the loss mitigation rep handling this property if you needed to. Should be an absolute non issue.

Write a letter to the Broker-Owner stating that you are withdrawing your offer on the Subject Property and want your Deposit monies returned immediately.

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