Realtor Not Returning Earnest Money. Cancelled My Check

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Realtor Not Returning Earnest Money. Cancelled My Check

Lokesh W.
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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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.

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  • CJ F
    Clearwater, FL · Member since 2013 · 15 posts · 9 votes
    13y

    Here is the standard inspection contingency for Wisconsin. I apologize for the long post. It will be a huge headache trying to back out without 'significant defects'. Especially when you don't have anyone representing you. Been there done that.

    INSPECTION CONTINGENCY: This Offer is contingent upon a Wisconsin registered home inspector performing a home
    inspection of the Property, and an inspection, by a qualified independent inspector, of
    which discloses no defects as defined below. This contingency
    shall be deemed satisfied unless Buyer, within days of acceptance, delivers to Seller, and to listing broker if Property is
    listed, a copy of the inspector’s written inspection report(s) and a written notice listing the defect(s) identified in the inspection
    report(s) to which Buyer objects. CAUTION: A proposed amendment will not satisfy this notice requirement. Buyer shall order
    the inspection and be responsible for all costs of inspection, including any inspections required by lender or as follow-up inspections to
    the home inspection. Note: This contingency only authorizes inspections, not testing. (See lines 97 - 110.)
    RIGHT TO CURE: Seller (shall)(shall not) STRIKE ONE have a right to cure the defects. (Seller shall have a right to cure if no choice is indicated.)
    If Seller has right to cure, Seller may satisfy this contingency by: (1) delivering a written notice within 10 days of receipt of Buyer’s notice of Seller’s election
    to cure defects, (2) curing the defects in a good and workmanlike manner and (3) delivering to Buyer a written report detailing the work done no later than
    3 days prior to closing. This Offer shall be null and void if Buyer makes timely delivery of the above notice and report and: (1) Seller does not have a right
    to cure or (2) Seller has a right to cure but: a) Seller delivers notice that Seller will not cure or b) Seller does not timely deliver the notice of election to cure.
    “DEFECT” DEFINED: For the purposes of this contingency, a defect is defined as a structural, mechanical or other condition
    that would have a significant adverse effect on the value of the Property; that would significantly impair the health or safety of future
    occupants of the Poperty; or that if not repaired, removed or replaced would significantly shorten or have a significant adverse
    effect on the expected normal life of the Property. Defects do not include structural, mechanical or other conditions the nature and
    extent of which Buyer had actual knowledge or written notice before signing this Offer.
    0Reply
  • Tina Granger
    Professional · Orange, TX · Member since 2013 · 26 posts · 3 votes
    13y

    It is an option to be released from the contract FOR ANY REASON and not contingent on performing an inspection but guaranteeing his earnest money refund. So it benefits the buyer, not the seller. There isn't enough information here... did he pay for the option or stop payment on that too? If he did... he doesn't have an option (which means he can't get out for any reason). Perhaps the agent should have talked to the seller (and he may have) and it all could have been avoided and they would have just let him walk away, tear up the contract, hand him his check, and moved on to the next "supposed" offer. (The property would be back on the market immediately). Why do you think the sellers didn't do that?? Why do you think the buyer stopped payment on the check??

    Broker/lawyer committees put these agreements together as a result of lawsuits. The attempt is to be fair to all parties involved in the agreements.

    I may be new to investing but I am not new to real estate. This was an unbiased contribution from my area of expertise on what I would have told the gentleman that made the initial post if he had asked me... based on the information he provided. Oh wait, he did ask!

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  • Tina Granger
    Professional · Orange, TX · Member since 2013 · 26 posts · 3 votes
    13y

    I stand corrected by the Wisconsin contract contingency! In Texas, it is an unrestricted right to terminate for ANY REASON!

    0Reply
  • 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.:
    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.

    Yes, I don't know what to call him other than agent but I know he is not a buyer agent for me. I wanted to do a property inspection and asked for date and time to do that to which he responded a day later by saying the attorney wanted $600.

    0Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    13y

    Lokesh, by the way, what attorney? I assume it's the sellers attorney, and the money would go to the seller.

    0Reply
  • Lokesh W.
    OP
    Property Manager · Milwaukee, WI · Member since 2011 · 185 posts · 16 votes
    13y
    Originally posted by Wayne Brooks:
    Lokesh, by the way, what attorney? I assume it's the sellers attorney, and the money would go to the seller.

    Yes, seller's attorney wants $600.

    0Reply
  • Account Closed
    Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    13y

    CJ F Thanks for posting that WI inspection contingency info. It appears to be written in such a way as to prevent the inspection from being used as a contingency clause. While it attempts to define defective, it's pretty wide open. I can let the seller cure, or not. But what I prefer is no seller cure and renegotiating price. I wouldn't want to sign that as a buyer.

    0Reply
  • Steve Babiak
    Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
    13y

    I can only think "Too bad Lokesh W. posted all of this AFTER he had already made these moves, rather than before."

    0Reply
  • CJ F
    Clearwater, FL · Member since 2013 · 15 posts · 9 votes
    13y
    Originally posted by K. Marie Poe:
    CJ F Thanks for posting that WI inspection contingency info. It appears to be written in such a way as to prevent the inspection from being used as a contingency clause. While it attempts to define defective, it's pretty wide open. I can let the seller cure, or not. But what I prefer is no seller cure and renegotiating price. I wouldn't want to sign that as a buyer.

    Yes, I believe nearly everyone strikes out the option to let the seller to cure. What I like to do as well is strike out the section that says the seller can sue me if I default :)

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  • Ramon Jenkins
    Real Estate Agent · Milwaukee County, WI · Member since 2009 · 3k+ posts · 525 votes
    13y

    Nice way to cover your behind / trick - @CJ F
    “ What I like to do as well is strike out the section that
    says the seller can sue me if I default “

    0Reply
  • Robert L.
    Real Estate Broker · Camarillo, CA · Member since 2013 · 6 posts · 1 vote
    13y

    In the upper part of the thread you mentioned a counter offer presented to you. Did you sign and return it? If you have it has it expired? Ask your attorney if the counter offer wipes out the original offer.

    I remember from some class that a counter offer by the seller is a rejection of your original offer. If so, depending on where you are it may matter.

    0Reply
  • Suzie B.
    Greentown, IN · Member since 2012 · 140 posts · 18 votes
    13y

    Was this property listed "as is"? Can you even decline after an inspection on an as is property?

    0Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    13y

    "As is" only means the seller won't fix anything. It has nothing to do with proper inspections or finding defects that are not obvious.

    2Reply
  • Lokesh W.
    OP
    Property Manager · Milwaukee, WI · Member since 2011 · 185 posts · 16 votes
    13y
    Originally posted by Robert L.:
    In the upper part of the thread you mentioned a counter offer presented to you. Did you sign and return it? If you have it has it expired? Ask your attorney if the counter offer wipes out the original offer.

    I remember from some class that a counter offer by the seller is a rejection of your original offer. If so, depending on where you are it may matter.

    The listing agent asked to sign the counter immediately!

    0Reply
  • Lokesh W.
    OP
    Property Manager · Milwaukee, WI · Member since 2011 · 185 posts · 16 votes
    13y

    My attorney’s assistant asked me to speak with the seller’s attorney and negotiate myself first and if it does not work out, involve my attorney.

    I spoke to the seller’s attorney and he agreed to $300 payment; that’s amount I would have paid for the property inspection on this 3/3 duplex. He appreciated my honesty is telling them the real reason for backing out from the deal (because I found a better deal) and NOT finding some weasel clause in the contract like the property inspection. I was surprised that the seller’s attorney was nice.

    If I had gotten out without paying anything, then I would have felt bad so $300 is not bad for me. I’ve sent this check to the realtor. Once he receives the money, he will write a mutual cancellation contract. Let’s see how this turns out in the end.

    I thought I got some great suggestions on this topic. I read through the entire discussion again.

    I hope I don’t have any more issues with this deal because I want to put this behind and move on. I’ll keep you posted here on BP…

    0Reply
  • CJ F
    Clearwater, FL · Member since 2013 · 15 posts · 9 votes
    13y

    I'm glad it's all resolved and you're happy but I can't help myself and need to beat the dead horse a bit...

    I thought it was $600? Where did $300 come from? Were they just pulling numbers out of the air? I would have asked to have seen the written bill that the attorney was going to present to the seller for his services, because now it sounds like you got screwed out of $300. It seems like the attorney just got $300 for basically doing nothing, which would explain why he's being nice.

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