Hi everyone. Happy new years to all.
I have a concern about earnest money. I initially intended on double closing on a property however my B-C buyer backed out of the deal. I disclosed that earnest money was nonrefundable. The problem came about when my closing manager said that I need to talk to my broker to put a claim on the deposit because I dont own the property yet. and then suggested I spoke with an attorney.
My question is wouldnt I automatically be entitled for the deposit? and why should I have to speak with my broker?
Couple of questions.
Is your C buyer using another agent?
The contract deals with EM being refundable, not what you "disclose".
Who is holding the EM? A title co. can't release an EM without all parties signing a release for it, you'd have to sue/settle.
Did your sales contract mention the sale being contingent upon you acquiring title?
The deposit is being held at my title company. And there's no realtor involved besides me. and no the contract didn't say it was contingent upon acquiring title.
I think the only thing you are automatically entitled to is the claim to the earnest money. If the Buyers earnest money was nonrefundable and all the proper disclosures were made you should win your claim in a court. That is the catch, you have to go through court to have it release if you cannot get the Buyer to sign off on giving you the earnest money. In Wisconsin the document is called cancellation and mutual release. The Buyer and Seller agrees upon who will receive the money and the amount. Have the Buyer to sign a similar document and the money is yours. Depending on the earnest money amount it might not be worth it to pursue a claim in court.
1. Legally, the Purchase and Sale Contract constitutes transfer of money. Talk to an attorney and they'll tell you that a signed offer with a purchase price is valid without earnest money.
2. The earnest money is what the brokers want and they sell it to the public as necessary. Can't blame them - they are protecting their ***. This is why you are being told to speak to the broker...
3. There is a bigger problem here. If you haven't noticed, in real estate investing all you have is your word. If you signed the contract - perform. if you can't perform, don't sign the contract. If you offered earnest money - leave it be. Your reputation is more important. You go to the seller and admit that you couldn't perform and never intended to buy. You know you f'd up and you will let them keep the earnest money. This is the honorable and right thing to do...
You put up EM & then did not close? Why would you get it back?
As an agent, you should know the normal procedures dealing with EM forfeiture. Your contract dictates when and if it is forfeited, but you might have some issues if your contract didn't reveal you were not the current title holder.
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