Need advice on how to get earnest money back

14 Replies

Hey, love the bp family, and first time posting here i hope i can get some advice.

so long story short, I had a contract fall through on a triplex due to the mortgage being denied (I tried to purchase it as a primary residence and the seller won't vacate any of the tenants so I couldn't continue with the purchase).

Now the seller is fighting me on the earnest money, we are past the financing contingency date (30 days) but its due to the seller not vacating a tenant as we verbally agreed on (his tenants are on short-term leases) not due to my finances.

I will probably consult on attorney on this one but was wondering if anyone has some advice or has been in a similar situation until then 

P.s im in jacksonville FL area.

thanks!

Dan

Originally posted by @Dan Holtz :

Hey, love the bp family, and first time posting here i hope i can get some advice.

so long story short, I had a contract fall through on a triplex due to the mortgage being denied (I tried to purchase it as a primary residence and the seller won't vacate any of the tenants so I couldn't continue with the purchase).

Now the seller is fighting me on the earnest money, we are past the financing contingency date (30 days) but its due to the seller not vacating a tenant as we verbally agreed on (his tenants are on short-term leases) not due to my finances.

I will probably consult on attorney on this one but was wondering if anyone has some advice or has been in a similar situation until then 

P.s im in jacksonville FL area.

thanks!

Dan

 If you are past the financing contingency date, then I doubt you can get your money back. If you plan to owner occupy, you should not be placing offers on properties without vacant units. You should only do this if there is a clause in the purchase agreement that the owner delivers a unit vacant. I know you said they verbally agreed to it, but nothing should be verbal when purchasing real estate. You may be stuck on this one. Consider it an expensive learning experience. 

Dan, your first thought, consulting an attorney, is the right approach.  An attorney will tell you the best course of action. It's always best to have professionals as part of your team for advice and guidance, especially early in your investing career.

If you didn't have your LOI with terms in writing, it may be tough to get the EMD back. Of course, you can sue, but that will cost attorney's fees, etc.

We always submit LOIs in writing with all contingencies and you should take the opportunity to do the same.  Hopefully someone else who has been in this situation has better suggestions than I do.

Good luck, Dan!

@Dan Holtz

Definitely consult your attorney. They shouldn't have any right to keep that if you were denied the loan because they chose not to remove a tenant. That is on them.

Like most folks have prefaced their posts with here - Smart decision to consult with an attorney. 

In Michigan at least, that EMD won't be released unless both parties have signed agreeing to how it will be disbursed. On the buy side, if a seller refuses to sign the release enabling that EMD to get sent back to you, small claims court is usually the next step. Often, at least in our experience, it isn't worth the trouble for the seller (especially when they know you are in the right as it appears here) and they ultimately sign OR agree to split that EMD in some way.

have you spoken with the seller and discussed how you both want to make this transaction happen. you dont want the attorneys to win. so why doesnt he give you time so he can vacate the tenant and you can get the financing? if he doesnt give you time, your attorneys will speak and everyone will lose..ask him if he would be opposed to you handling the move out of the tenant. have him write it into the contract as an adendum..

Who is holding the EMD?

If an agent/title company/escrow officer, then your "safe" until process resolves.

If you gave it directly to seller, they probably already spent it, making it more likely you'll have to work out a deal to continue the purchase or take them to small claims.

Standard practices vary by market.  Your market could be very different in the standard practices than my market.  

It is not clear what short term lease really means here, but if it is short term lease what prevents you from giving notice and then moving into the unit?

In my market the default on the purchase agreement calls for mediation/arbitration.  Not sure what you contract states.  You need to know what your contract indicates.  Your RE agent should be able to help you understand the contract if necessary.

Most lawyers will provide a short consultation for free.  Even if the contract calls for mediation/arbitration, it could still be advantageous to consult an attorney if you can get a free consultation.

Also in my market the EMD is held by escrow so the seller does not simply get to decide that they want to keep the EMD. The seller would not get the EMD until it is resolved that the seller is entitled to the EMD.

Mediation will likely work to your advantage if you have an email (or other proof) indicating a unit was to be delivered vacant and that the reason you could not obtain financing was that a unit was not being provided vacant. The mediator ideally sees it the same way and informs the seller that this is an issue the seller caused. That would be the way the mediator is basically subtly implying that arbitration is likely to rule against the seller. Ideally the seller consents to the return of the EMD, but if not proceed to arbitration.

Note because the seller is not offering any EMD refund for their lack of providing a vacant unit, you have little to lose going to mediation/arbitration and the seller could potentially loose the entire EMD.

Good luck

ok. I really appreciate all the advice I got here so im back to tell you how things ended up.

1. I got the money back, i wouldnt worry about it if it was a small sum, but ill say that it was almost 40K of a deposit, so thats why I did worry. lesson learned - ill be more careful with deposits for next time, but tbh theres no way i wouldve gotten this deal without a high deposit.

2. because the seller didn't provide the lease agreements for the tenants, I knew i had a case. I consulted with an attorney that confirmed that and we were going to send him a demand letter, but he ended up just releasing the funds before hand.

another point is to work with a better realtor + title company. they were not on the deal in terms of dates and no one (including me) paid attention to the important dates, kind of a beginner mistakes but i had some issues in my personal life that took my attention from that and i did expect the 'professionals' on the deal to be more on top of these dates , but i take responsibility for that as well. i just wont use either of them in the future.

Hope that'll help anyone else as well thats why i shared this info, and again thanks everybody for the support, both the mental and technical one.

Appreciate yall and happy holidays.