Realtor Not Returning Earnest Money. Cancelled My Check

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Realtor Not Returning Earnest Money. Cancelled My Check

Property Manager · Milwaukee, WI · Member since 2011 · 185 posts · 16 votes

I have never backed out on a deal for which I have paid earnest money before.

I had an accepted offer on a duplex. I mailed my earnest money but later I changed my mind because another offer of mine got accepted so I asked the realtor not to deposit the money. The realtor had NOT yet received my check in the mail but he said that based on purchase contract, he has to deposit the earnest money. He asked me to spend $400 on property inspection and then cancel the deal or go through the complete financing process and pay the fees for financing and then reject the deal. He basically did not want to let me go easy.

I cancelled the check so now, he says he wants $600 for attorney fee of the seller. My understanding is that if we don’t pay the earnest money on time (5 days), the contract is null and void but he is insisting that I pay $600.

Accepted offer: Friday evening (2/22)
Mailed earnest check of $2000: Sunday
Requested to cancel the deal: Monday afternoon
Cancelled check: Tuesday morning
Realtor requesting $600 attorney fee: Tuesday night

This is really bothering me because people lock up properties deals for 60 – 120 before closing and when they don’t close, they still get their earnest money back. I tied up the property for 2.5 days (Saturday, Sunday and Monday Afternoon) or 1 business day (Monday) and still I am expected to pay $600!!

This attorney is from a small law firm (just 1 or 2 people lawyers).

I don't understand why they are giving me such hard time about this. Before my acceptance of the counter offer, he said that he is expecting couple of more offer so I have to accept immediately and he will accept other offers as a backup only but now, he is trying to just get to me.

I have contacted my attorney but I wanted to know anyone has been in this situation before.

Any suggestions are greatly appreciated.

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Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes

13y

Originally posted by Lokesh W.:

I wanted to do the inspection and I mentioned the possible dates that the property inspector had the availability but the realtor replied by saying that there is no need to do the inspection instead pay the attorney fee or $600. The inspection would have cost me $350.

BTW, what happens if someone does not pay the earnest money? Is there a fine for this? Does the purchase contract say there is a fine for this?

Why are you asking us what your purchase contract says? How would we know since we don't anything about the contract? I suggest reading it.

See this reply in the discussion

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Wayne Brooks
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
13y
Well, it looks you breached a signed contract by not placing the agreed to deposit. Did you not have an inspection period where you could cancel? I assume you did since the agent wanted you to do an inspection. I assume your contract allows you to do the inspection yourself without paying for an inspector. Not sure of your liability.
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Lokesh W.
OP
Property Manager · Milwaukee, WI · Member since 2011 · 185 posts · 16 votes
13y
I wanted to do the inspection and I mentioned the possible dates that the property inspector had the availability but the realtor replied by saying that there is no need to do the inspection instead pay the attorney fee or $600. The inspection would have cost me $350.

BTW, what happens if someone does not pay the earnest money? Is there a fine for this? Does the purchase contract say there is a fine for this?
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Account Closed
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
13y
What does your signed, accepted offer document say? I'm assuming it's a standard realtor board contract. I'm thinking there is probably something in there that makes your contract null and void if you fail to "deposit" earnest money. IMO, you failed to deposit it when you cancelled it.

I doubt there is anything in your accepted offer that requires that you must pay for an inspection or go through a loan application in order to cancel. I'm not sure what the agent's thinking was when he asked that you to do this.......unless:

Is this a dual listing agreement? The agent may have advised the seller to take your offer over others. Now that you've cancelled, the agent may be trying to cover his butt with the seller.

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Account Closed
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
13y
Originally posted by Lokesh W.:
I wanted to do the inspection and I mentioned the possible dates that the property inspector had the availability but the realtor replied by saying that there is no need to do the inspection instead pay the attorney fee or $600. The inspection would have cost me $350.
BTW, what happens if someone does not pay the earnest money? Is there a fine for this? Does the purchase contract say there is a fine for this?

Why are you asking us what your purchase contract says? How would we know since we don't anything about the contract? I suggest reading it.
3 Reply
Lokesh W.
OP
Property Manager · Milwaukee, WI · Member since 2011 · 185 posts · 16 votes
13y
That's what I thought - when you don't pay the earnest money, the contract is null and void.

The seller had rejected another offer 2 weeks before I made an offer. I am not aware of any dual listing. The realtor mentioned to me that there is another offer coming in but if mine is accepted, then the other offer will only be a backup offer (i.e. my offer will take precedence).

The contract does not say anything about this. The addendums are only related to lead paint disclosure, "as is" offer etc. - most of them are the usual RE purchase agreements.
0 Reply
Lokesh W.
OP
Property Manager · Milwaukee, WI · Member since 2011 · 185 posts · 16 votes
13y
Originally posted by K. Marie Poe:
Originally posted by Lokesh W.:
I wanted to do the inspection and I mentioned the possible dates that the property inspector had the availability but the realtor replied by saying that there is no need to do the inspection instead pay the attorney fee or $600. The inspection would have cost me $350.
BTW, what happens if someone does not pay the earnest money? Is there a fine for this? Does the purchase contract say there is a fine for this?

Why are you asking us what your purchase contract says? How would we know since we don't anything about the contract? I suggest reading it.

Hi Marie,

Thanks for your responses. Yes, I read the contract and it is the standard purchase contract that I am aware of. I could ask the realtor to pull out a particular line in the contract that shows that I owe something if I don't pay the earnest money.

I feel really bad about this and am embarrased as well but I don't think I should be paying $600....
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Account Closed
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
13y
You say you are not aware of a dual listing agreement. So where's your agent in all of this?
1 Reply
Lokesh W.
OP
Property Manager · Milwaukee, WI · Member since 2011 · 185 posts · 16 votes
13y
Originally posted by K. Marie Poe:
You say you are not aware of a dual listing agreement. So where's your agent in all of this?

I may have misunderstood your question. I submitted the offer to the listing agent. I am dealing with listing agent only.
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J ScottPro Member
Moderator
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
13y
Originally posted by Lokesh W.:
Originally posted by K. Marie Poe:
You say you are not aware of a dual listing agreement. So where's your agent in all of this?

I may have misunderstood your question. I submitted the offer to the listing agent. I am dealing with listing agent only.

This is the reason I HIGHLY recommend that new investors have an agent representing THEM. The listing agent has a fiduciary responsibility to the seller, meaning the agent has a responsibility to try to get the most money out of you. S/he is doing a pretty good job of trying.

I'd recommend reading your agreement and see what it says about this. If you can't figure it out, find a good agent/attorney who is willing to help.

And next time, have your own agent!
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1 Reply
Ibrahim Hughes
Real Estate Consultant · Bloomfield, NJ · Member since 2010 · 2k+ posts · 1k+ votes
13y
Lokesh W. - in NJ we have a 3 day attorney review period. Once the offer is accepted and the contract signed by both parties, each side has 3 days to get the contract to their attorney, have her make revisions and/or cancel for any reason. This is called the 'attorney review period'. And once either attorney reaches out to the other for proposed changes to the agreement, the 3 day clock stops and the attorney review period last as long as it has to.

After all terms are agreed to during attorney review, the period is concluded and the deal is officially 'under contract'.

So does your state have an attorney review period?
1 Reply
Lokesh W.
OP
Property Manager · Milwaukee, WI · Member since 2011 · 185 posts · 16 votes
13y
J Scott, Yes, I left a VM for my attorney. I signed the standard contract. I asked the agent if I am legally required to pay the $600 and he replied by asking me to talk to the attorney.

Ibrahim S, there is no attorney review period. In fact, my offer was countered by adding additional addendum about financing for property and the realtor asked me sign that immediately.
0 Reply
CJ F
Clearwater, FL · Member since 2013 · 15 posts · 9 votes
13y
You defaulted on an accepted offer. Standard wi contracts don't say anything about an offer being null and void if earnest money isn't delivered. They could sue for specific performance. Granted its extremely bad business and a $600 attorney fee is downright ridiculous. You should find someone to represent you that knows what they're doing asap before this gets even more out of hand and let us know how it goes.
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Rob K.
Investor · Southeast, MI · Member since 2012 · 2k+ posts · 1k+ votes
13y
I guess I'm confused.

It looks like you signed a legal contract to purchase a property and then changed your mind. If you cancelled the check, what is the problem? You're currently not out anything other than your check cancellation fee. ($35?) I suppose they could come after you for specific performance, but that's not likely.

Why are you making offers on multiple properties if you can only afford to purchase one? Would you want someone agreeing to sell you a house and then "change their mind" the next day after they signed the purchase agreement? I'm guessing this entire thread would have a different tone if the seller had done that to you.

I would suggest that in the future, you make one offer at a time and follow through on it.
3 Reply
Lokesh W.
OP
Property Manager · Milwaukee, WI · Member since 2011 · 185 posts · 16 votes
13y
CJ F, I spoke to the attorney's colleague. I am waiting for my attorney.

Rob K, My realtor wants this to be over so we all can move on. I am thinking of getting a property inspection, which I can do for less than $250 and then reject.
0 Reply
Lokesh W.
OP
Property Manager · Milwaukee, WI · Member since 2011 · 185 posts · 16 votes
13y
Rob K, I made offers on 2 properties. The bank owned property had a lot of activity and they did not get back to me after 7 days. I wanted move forward with the property that I now rejected but I like the bank owned property better so when I heard from the bank, I decided to go with it.
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Ibrahim Hughes
Real Estate Consultant · Bloomfield, NJ · Member since 2010 · 2k+ posts · 1k+ votes
13y
Originally posted by Lokesh W.:

Ibrahim S, there is no attorney review period. In fact, my offer was countered by adding additional addendum about financing for property and the realtor asked me sign that immediately.

Fyi - during the attorney review period, the contract and any addendum added to the contract by the Realtors are signed immediately by both parties. After both the seller and buyer have a copy of the fully executed (signed) contract, attorney review officially begins. But if you're sure your state doesn't have an AR period then I guess the point is moot.

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CJ F
Clearwater, FL · Member since 2013 · 15 posts · 9 votes
13y
If you do an inspection you will dig an ever bigger hole for yourself. First of all you would have to resubmit the earnest money in order to do this. And then you can't just reject after an inspection because you feel like it. There has to be significant defects beyond which you were already aware.

To me the biggest issue here is that you still have an accepted offer on the table. The clock is ticking and it is just giving them more time to rack up costs for specific performance. I'm no lawyer and this is no law advice, but if it was me personally, I would send them something in writing ASAP stating you are withdrawing your offer. Then I would ask to see a copy of this attorney bill of $600 that is dated within the timeframe that the accepted offer was on the table. If they produced it then I would feel I basically had no choice but to pay up.
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Account Closed
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
13y
Originally posted by Lokesh W.:
CJ F, I spoke to the attorney's colleague. I am waiting for my attorney.
Rob K, My realtor wants this to be over so we all can move on. I am thinking of getting a property inspection, which I can do for less than $250 and then reject.

You don't have a realtor, unless you signed a dual listing agreement. The agent isn't working for you. That's why there is all this funny business with asking for inspections before canceling and/or for you to pay the attorney. The agent helped the sellers select a bad offer/bad buyer (you) and is trying to make it look good to the seller.

If it were me I would tell the agent you are not going to perform and that you are not going to be ordering any inspections or paying any attorney fees. They'll have to sue to get anything and I doubt they will.
1 Reply
Account Closed
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
13y
Originally posted by CJ F:
If you do an inspection you will dig an ever bigger hole for yourself. First of all you would have to resubmit the earnest money in order to do this. And then you can't just reject after an inspection because you feel like it. There has to be significant defects beyond which you were already aware.
To me the biggest issue here is that you still have an accepted offer on the table. The clock is ticking and it is just giving them more time to rack up costs for specific performance. I'm no lawyer and this is no law advice, but if it was me personally, I would send them something in writing ASAP stating you are withdrawing your offer. Then I would ask to see a copy of this attorney bill of $600 that is dated within the timeframe that the accepted offer was on the table. If they produced it then I would feel I basically had no choice but to pay up.

CJ F Are you sure that a buyer can't cancel after an inspection for any reason? Not just if there are "significant defects"? Is that written somewhere? What if I don't like Heil furnances or pex plumbing and they are discovered during the inspection? Neither are significant defects but I don't want to buy a house with them. Is it your understanding I can't cancel? An inspection is about more than defects, so I'm curious if what you say is true.
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Bill Wallace
Residential Real Estate Agent · Mound, MN · Member since 2010 · 87 posts · 32 votes
13y
The solution to this was to have done a bare minimum inspection and cancel. In Minnesota you need to hire a "qualified" inspector but then the Inspection Contingency Addendum says that the qualifications are basically up to the buyer to determine.

If your state requires a certified inspector you could have hired someone for 15-30 minutes for peanuts and then cancelled. Now it's exposed you to possible breach.
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Rob K.
Investor · Southeast, MI · Member since 2012 · 2k+ posts · 1k+ votes
13y
Originally posted by K. Marie Poe:
What if I don't like Heil furnances or pex plumbing and they are discovered during the inspection? Neither are significant defects but I don't want to buy a house with them.

K. Marie Poe, Why don't you like PEX polumbing? I'm a huge fan of it. I think it's far superior to any other plumbing out there. I'm thinking about building a new house to live in and would definitely install PEX. Just curious why you're against it?

Sorry to hijack the thread.
0 Reply
Tina Granger
Professional · Orange, TX · Member since 2013 · 26 posts · 3 votes
13y
I am not sure what the laws are for Wisconsin (I'm in Texas) or the details of the contract you signed with the seller, but I would think the general process is the same. If you signed a contract with the seller and cancelled your earnest money check so that it could not be deposited you are most likely in breach of your contract. (Consult an attorney, YOUR attorney, for review of the contract before paying money to anyone.) If the earnest money check had been deposited and you also PAID (additional check made payable to owners) for an option (time in which to do inspections) in the contract, you likely have the unrestricted right to cancel the contract FOR ANY REASON, but you have to do it through the correct process. A real estate agent is required to deposit an earnest money check and have the contract receipted within a certain time frame after a contract is signed.

If you would have "opted out" during the option period stated in the contract (Again, that is how the process works in Texas), you would have received your earnest money deposit back, but would have taken about 30 days (a release is usually signed by both parties for it to be released). Not sure if your state closes at title companies or attorney offices... so that may change the process some.

YOUR attorney should be able to advise you on the best way to proceed.
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Account Closed
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
13y
Originally posted by Rob K:
Originally posted by K. Marie Poe:
What if I don't like Heil furnances or pex plumbing and they are discovered during the inspection? Neither are significant defects but I don't want to buy a house with them.

K. Marie Poe, Why don't you like PEX polumbing? I'm a huge fan of it. I think it's far superior to any other plumbing out there. I'm thinking about building a new house to live in and would definitely install PEX. Just curious why you're against it?

Sorry to hijack the thread.

Rob K The minute I posted that example I knew you would respond, wanting an explanation. I have nothing against pex (or Heil furnaces). It was just an example of something found during an inspection that a buyer might prefer or not prefer, but is not defective.
1 Reply
Account Closed
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
13y
I want to thank the agents/investors who have explained the cancellation process for their states. I see now that the inspection contingency, in addition to protecting buyers, can also be used legally as a weasel clause. I learned something new today. So, instead of a putting a stop payment on the check, the OP should have let the agent deposit the check, order an inspection, pay for inspection and then cancel contract and then wait for his earnest money to be returned. Thus keeping the buyer legal and not in breach of contract. Convoluted, but good. Thus keeping the seller's property off the market for a week or more and in contract with a buyer that doesn't plan to perform. Convoluted and bad.
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Wayne Brooks
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
13y
I don't know about in WI, but in FL the inspection clause is a true weasel clause. No reason needed, you can just cancel the contract during the inspection period.
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