Seller won’t release earnest money back

Member since 2020 · 41 posts · 8 votes

Sellers won’t release earnest money deposit back after denial of mortgage from the lender. What are my options to get their earnest money deposit back?

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Russell BrazilBusiness Member

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Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes

Originally posted by @Tralecia K Young:

@Nicholas Weckstein

The date of the letter was on the ninth but I sent a cancellation like on the seventh stating that I wasn’t going to get mortgage contingency. I believe my attorney sent it over on the 10th but it was dated for the ninth. apparently my attorney was super busy that he wasn’t able to respond quick enough to send it the same day. I believe he spoke with the attorney and he’s just waiting back to hear what the seller wants to do.

Sounds like you missed your contingency date if it was the contingency ended the 9th and you sent the financing denial letter on the 10th. Seems pretty clear to me if the facts as stated are true, seller gets the EMD. Your lawyer being too busy to adhere to the deadline doesnt change the fact of when the deadline was.

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David P.
Member since 2020 · 404 posts · 235 votes
5y
do you still have your contingencies in place? In california you dont actually lose them until you sign off so if it is past the day and you didn't sign the contingecy release form then you are still covered.
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Tralecia K Young
OP
Member since 2020 · 41 posts · 8 votes
5y
@David Pai
The mortgage Contingency deadline was the ninth I got my disapproval on the ninth but I let them know beforehand that I didn’t obtain financing for the house.
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Nicholas Weckstein
Real Estate Agent · Warrior Run, PA · Member since 2016 · 341 posts · 146 votes
5y
I have had this happen a few times, as long as you were within the date for the financing contingency. You should be okay. In the past when a seller didn't want to release funds to me, ive had a lawyer type up a letter and send to them. They usually release the money immediately. Not sure how much your deposit is, but I doubt its worth the time to the seller to get caught up in court costs and lawyer fees over a few grand.
When did you/your agent send over the disapproval? if it was on the 9th you should be fine. I suppose if it was a few days later then they feel like they have a leg to stand on, they could be right. but usually a letter from a lawyer scares them away from the fight.
best of luck, hope it all works out!
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Tralecia K Young
OP
Member since 2020 · 41 posts · 8 votes
5y
@Nicholas Weckstein
The date of the letter was on the ninth but I sent a cancellation like on the seventh stating that I wasn’t going to get mortgage contingency. I believe my attorney sent it over on the 10th but it was dated for the ninth. apparently my attorney was super busy that he wasn’t able to respond quick enough to send it the same day. I believe he spoke with the attorney and he’s just waiting back to hear what the seller wants to do.
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- Russell BrazilBusiness Member
  Moderator
  Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
  5y
  Originally posted by @Tralecia K Young:
  @Nicholas Weckstein
  The date of the letter was on the ninth but I sent a cancellation like on the seventh stating that I wasn’t going to get mortgage contingency. I believe my attorney sent it over on the 10th but it was dated for the ninth. apparently my attorney was super busy that he wasn’t able to respond quick enough to send it the same day. I believe he spoke with the attorney and he’s just waiting back to hear what the seller wants to do.
  
  Sounds like you missed your contingency date if it was the contingency ended the 9th and you sent the financing denial letter on the 10th. Seems pretty clear to me if the facts as stated are true, seller gets the EMD. Your lawyer being too busy to adhere to the deadline doesnt change the fact of when the deadline was.
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Tralecia K Young
OP
Member since 2020 · 41 posts · 8 votes
5y
@Nicholas Weckstein
My earnest deposit was $5000.
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Tralecia K Young
OP
Member since 2020 · 41 posts · 8 votes
5y
@Russell Brazil
We sent the cancellation several days prior though they just didn’t sign it. So my lawyer reached back out after they didn’t sign the original cancellation with the documentation of everything.
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- Russell BrazilBusiness Member
  Moderator
  Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
  5y
  Originally posted by @Tralecia K Young:
  @Russell Brazil
  We sent the cancellation several days prior though they just didn’t sign it. So my lawyer reached back out after they didn’t sign the original cancellation with the documentation of everything.
  
  And did the cancelation include the financing denial letter? What youve stated earlier did not include that, and seems to state that you told them your financing was going to be denied, but it sounds like you did not include a financing denial letter.
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Tralecia K Young
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Member since 2020 · 41 posts · 8 votes
5y
@Russell Brazil
Originally the house failed for appraisal due to some things that needed to be fixed when I had my contractor come out they were more damage that needed to be taken care of in order for it to pass so they decided that they weren’t going to cover the damages for the property so I wrote a letter of explanation to the mortgage lender stating that they weren’t going to do that and they issued a denial letter. They already knew that their property wasn’t going to pass because they weren’t going to cover the damages for the appraiser to come out to reinspect the property so they were pushing it out until we got the mortgage denial letter on the ninth but we had already issued the cancellation before that.
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Bob Galivan
Real Estate Broker · Cleveland, OH · Member since 2019 · 33 posts · 55 votes
5y
The reply depends on what state the contract was written in. I did not see that in the post. The contract financing contingency will contain language that deals with loan denial, and in the contracts that I am familiar with (Florida and Ohio), there is language that lets you out after the deadlines. The deadlines are usually to apply for the mortgage and to provide the mortgage commitment. If the property does not appraise or if you failed to qualify and were denied, you should be able to exit without a problem. If your broker is holding the EMD, the release may be governed by state law. If it is held by the title company, you have to go through the courts. You should be getting assistance from the real estate BROKER representing you, not the agent, AND from an attorney. What you need to do, IMHO, is to first notify the entity that is holding the deposit that they are not authorized to release it to anyone. The second thing is to GET AN ATTORNEY. My suspicion is that you will get an "offer" from the seller to "settle" for a part of the deposit, which is BS. The best course of action, if you can manage it, is to tie up the property so he cannot sell it pending the resolution of the dispute. That will require the services of an attorney. Don't delay.
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Brandon SturgillBusiness Member
Real Estate Broker · Columbus, OH · Member since 2013 · 3k+ posts · 1k+ votes
5y
@Tralecia K Young this is in Ohio?...EMD is largely pointless here....what happens is the money gets tied in escrow until there is consensus to release the funds...no consensus, no release....the money sits in limbo for 2-years and then goes back to you, its a lose/lose situation....or you get a court opinion...so, pay $6,000 in legal fees for $5,000...not a great idea...
In the last 20 requests for EMD we have submitted for listing clients where a buyer was unable to perform on a deal, the broker on the other side of the table acknowledges the initial request and then ignores every piece of documentation and future request...there is no repercussion...a lawyer might be able to help with motivation here.
This is usually a "pissing match" fueled by misunderstanding of how EMD works...
Your agent/broker should be advising you on this stuff...
Read this: https://codes.ohio.gov/ohio-re...
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Tralecia K Young
OP
Member since 2020 · 41 posts · 8 votes
5y
@Bob Galivan
I have an attorney already working on it he’s just not keeping me in the loop with what I can do to be able to get it back I’m not familiar with the laws here in New York when it comes to the earnest deposit I’m gonna have to do a little bit of research to see what I can find. thank you for your input I will reach out and see what else I can find out.
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Tralecia K Young
OP
Member since 2020 · 41 posts · 8 votes
5y
@Brandon Sturgill
I am located in New York so I will have to look up the codes for getting the earnest money deposit back. I will talk to my lawyer about trying to hold the seller from selling the property until he releases it because I don’t think it’s fair that he can’t resell the property with the earnest deposit not being settled yet.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
5y
Originally posted by @Russell Brazil:
Sounds like you missed your contingency date if it was the contingency ended the 9th and you sent the financing denial letter on the 10th. Seems pretty clear to me if the facts as stated are true, seller gets the EMD. Your lawyer being too busy to adhere to the deadline doesnt change the fact of when the deadline was.
this is why i cringe when buyers sellers put so much on closing attornies.. this is where you NEED AGENTS following your contract dates this is a simple docu sign .. busy attorney thats BULL you know what.. We control all our dates would never trust and attorney to do this unless its some big commerical deal.. they are too busy for this type of stuff this is what agents get paid for.

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Steven Foster Wilson
Rental Property Investor · Columbus, OH · Member since 2017 · 3k+ posts · 3k+ votes
5y
Originally posted by @Tralecia K Young:
Sellers won’t release earnest money deposit back after denial of mortgage from the lender. What are my options to get their earnest money deposit back?

Who is holding earnest money? If it is the selling broker or the title company, they will very quickly return the money when you introduce your attorney.
0 Reply
Tom GimerBusiness Member
DMV · Member since 2017 · 3k+ posts · 3k+ votes
5y
Read the contract and any separate agreement (if applicable) concerning the escrow. If the parties cannot agree on a release, those funds may need to be interpleaded.

The contract should also state exactly how a financing contingency would be implicated. Simply stating “my lender rejected me” before the deadline is generally not going to fly. “My lawyer was too busy” to give proper notice is definitely not going to work.
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Tom GimerBusiness Member
DMV · Member since 2017 · 3k+ posts · 3k+ votes
5y
Originally posted by @Steven Foster Wilson:
Originally posted by @Tralecia K Young:
Sellers won’t release earnest money deposit back after denial of mortgage from the lender. What are my options to get their earnest money deposit back?

Who is holding earnest money? If it is the selling broker or the title company, they will very quickly return the money when you introduce your attorney.

Haha. Not accurate.
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Tralecia K Young
OP
Member since 2020 · 41 posts · 8 votes
5y
@Jay Hinrichs
I know I was so disappointed in the outcome of him not being able to meet with me about this issue for about two weeks it was like we were playing phone tag back-and-forth.
0 Reply
Tralecia K Young
OP
Member since 2020 · 41 posts · 8 votes
5y
@Steven Wilson
I wish I could just talk to them on my own defense by talking to them directly but I guess I have to let my attorney do everything which I thought was weird because if I could talk to them directly i feel like this issue would’ve been already taken care of.
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Tralecia K Young
OP
Member since 2020 · 41 posts · 8 votes
5y
@Tom Gimer
I have a mortgage contingency and it says if I don’t obtain a mortgage approval by the ninth then the contract is voided and I should receive my earnest deposit back.
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Tom GimerBusiness Member
DMV · Member since 2017 · 3k+ posts · 3k+ votes
5y
Originally posted by @Tralecia K Young:
@Tom Gimer
I have a mortgage contingency and it says if I don’t obtain a mortgage approval by the ninth then the contract is voided and I should receive my earnest deposit back.

Cut and paste the exact language from both the financing contingency and earnest money deposit sections of the contract please.

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- Tralecia K Young
  OP
  Member since 2020 · 41 posts · 8 votes
  5y
  Originally posted by @Tom Gimer:
  Originally posted by @Tralecia K Young:
  @Tom Gimer
  I have a mortgage contingency and it says if I don’t obtain a mortgage approval by the ninth then the contract is voided and I should receive my earnest deposit back.
  
  Cut and paste the exact language from both the financing contingency and earnest money deposit sections of the contract please.
  
  0 Reply
Steven Foster Wilson
Rental Property Investor · Columbus, OH · Member since 2017 · 3k+ posts · 3k+ votes
5y
Originally posted by @Tom Gimer:
Originally posted by @Steven Foster Wilson:
Originally posted by @Tralecia K Young:
Sellers won’t release earnest money deposit back after denial of mortgage from the lender. What are my options to get their earnest money deposit back?

Who is holding earnest money? If it is the selling broker or the title company, they will very quickly return the money when you introduce your attorney.

Haha. Not accurate.

Thats how it is here in Oho. People dont even bother with EMD anymore because it always ends up going back to the buyer!
1 Reply
Steven Foster Wilson
Rental Property Investor · Columbus, OH · Member since 2017 · 3k+ posts · 3k+ votes
5y
Originally posted by @Tralecia K Young:
@Steven Wilson
I wish I could just talk to them on my own defense by talking to them directly but I guess I have to let my attorney do everything which I thought was weird because if I could talk to them directly i feel like this issue would’ve been already taken care of.

Your legal backing isn't as tough. Come to Ohio and you won't have this problem
1 Reply
Tralecia K Young
OP
Member since 2020 · 41 posts · 8 votes
5y
@Tom Gimer
I posted below
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Deanna O.
Rental Property Investor · San Diego, CA · Member since 2010 · 377 posts · 314 votes
5y
Any chance that you EMAILED them anything before the 9th? That might be "written". Me guessing from CA. Does sound like your lawyer didn't do you any favors though.
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Tralecia K Young
OP
Member since 2020 · 41 posts · 8 votes
5y
@Deanna Opgenort
Yes we did we sent over cancellation beforehand.
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- Russell BrazilBusiness Member
  Moderator
  Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
  5y
  Originally posted by @Tralecia K Young:
  @Deanna Opgenort
  Yes we did we sent over cancellation beforehand.
  
  @Tralecia K Young Looking at what you pasted in your contract, it looks like in the event there were lender required repairs, the seller would cover $200 and you would cover $2500.
  
  So what did you exactly send to them on the 7th and what exactly did you send on the 10th?
  
  Because piecing together the information from what you posted here, it does not sound like you sent a financing denial letter on the 7th.
  
  This screen cap states you were expecting financing to be denied, but not that it was, nor that proof that it was was delivered
  
  If you were cancelling it based on the appraisal contingency, proof that the reprairs would cost more than $2700 would need to be included based on your appraisal contingency as stated here
  
  It sounds like no proof of actual financing denial, or appraisal failure were provided until the 10th. An estimate or such from a contractor showing repairs more than the $2700 laid out would be needed to justify that the appraisal contingency requirement was not met.
  Im only going off the very limited information posted in this thread, but it seems like you missed the deadlines in your contract. Do you have an agent? At least in non-attorney states, your agent would be making sure the deadlines were adhered to. Im not sure how it works in attorney states.
  I hope it works out for you. Id get a new lawyer on the next go around though, as missing a clear deadline I would not personally find acceptable.
  
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Deanna O.
Rental Property Investor · San Diego, CA · Member since 2010 · 377 posts · 314 votes
5y
I have a feeling that while the seller might WANT to keep the earnest $, and might try to bluff into to keeping it, that email might qualify as notification "in writing" for legal purposes - worth asking your lawyer. Make sure you keep a copy of the email you sent, with all of the digital info proving when it was sent, & possibly in several different format. Make a PDF or JPG of a screen shot showing the time sent, and probably a hard copy print out wouldn't be a bad idea either-- all of this is likely overkill, but not bad practice for "just in case".
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