Way OT -- Real Estate legal question -- Earnest money

PROMETHIUS88

Sorry for being off topic here, but I know there are lots of knowledgeable folks on the boards. A friend entered into a contract to purchase a home and put down $1k earnest money. The sale was contingent on her being divorced by 7/30/12 which she found she would not be last month due to the courts. Now, the real estate agent and broker at the agency state that the sellers are refusing to sign the paperwork to get her money back. Outside of hiring an attorney, is there a way to force their hand and make them sign so they can release the money back? This is in Illinois by the way. Thanks in advance for the help!

Tim

JoeBanzai

Tim,

I am not a lawyer, but have bought several homes in my life. I live in Minnesota. I think she is out of luck. That's why it's called earnest money, it is forfeited if buyer backs out. She basically "backed out" when her divorce did not go through.

People who have her money do not have to return it in this case, as I understand it.

Hope I am wrong

Joe

OckhamsRazor

Perhaps she can threaten to file a lis pendens against the property. The point is not to win the case but to cloud the title for an extended period of time which effectively prevents the Seller from selling the property to another Buyer. No title insurance company will touch the property with this cloud over the title, which means no financial instituition will provide a loan to a prospective buyer, which means the property is dead on the market for as long as the case remains open. You need to make sure the Seller and their agent know the impact of this filing on the property they wish to sell. Because the wheels of justice may turn extremely slowly if the plaintiff has their foot on the litigation break. They should conclude, correctly, that having their property unmarketable for 6 months or more until the suit/notice is retired is not worth the $1,000 in earnest money they are fighting to keep.

1954

I believe Joe is correct as well. The earnest money is a promise to follow through regardless of reason and if the sale does not happen you waive the earnest money. The only way that she could get the money back is if she placed in writing that she will buy the house only if the divorce goes through. Or, of course, they want to be nice.

TheTalkingWalnut

I'm not an attorney, but I believe that you need to look at the wording of the contract. As it's been relayed to us, it seems it could go either way. Was there a contingency clause or not?

PROMETHIUS88

Thanks for the responses. To clarify, there was a repair addendum...which they didn't want to do everything asked as well as a divorce addendum. It specified that it was contingent on the divorce being final by 7/30 which she found out wasn't going to happen so let them know that early in June. At that time they refused to give her the money back...ie sign the release and still after the date has passed refuse to sign the release.

vintageinvestments

I am a real estate investor. Ethically they should return the money due to circumstances, but legitimately they do not have to per the contract. She can try to file a lien, but it will get removed. I hope it all works out. I have returned earnest money at times for various reasons, but not everyone is like that.......especially when realtors and brokers are involved.


Jason

PROMETHIUS88

So the $1k that was put into escrow....what happens to it? She's not going to sign to give it to them and they aren't going to sign to release it to her? Also, what good does is it to write into the contract that the sale is subect to...well anything for that matter if they don't have to agree to return the money?

TheTalkingWalnut

I'm still confused. Feel free to PM me so we don't bore the board. I'm not trying to be critical, but these things are pretty logical. If we can determine what was stipulated to, what was implied, what was merely assumed and what was truly contingent, it should become more clear.

larryallen73

I am a lawyer and the money is owed to her if the contract was specifically contingent on the divorce. It's really simple.

Additionally if the contract really says that they just need make demand on the escrow company and threaten to sue them if they don't give the money back. The seller shouldn't have to sign off legally. The problem is title/escrow companies are notorious for covering their butts every which way they can and don't do anything without everybody signing off. There is the law and then there are title companies. {this is also my attempt to see if a former board member, who was a title company lawyer, is reading these boards anymore}.

Nathaniel1960

<< <i>Perhaps she can threaten to file a lis pendens against the property. The point is not to win the case but to cloud the title for an extended period of time which effectively prevents the Seller from selling the property to another Buyer. No title insurance company will touch the property with this cloud over the title, which means no financial instituition will provide a loan to a prospective buyer, which means the property is dead on the market for as long as the case remains open. You need to make sure the Seller and their agent know the impact of this filing on the property they wish to sell. Because the wheels of justice may turn extremely slowly if the plaintiff has their foot on the litigation break. They should conclude, correctly, that having their property unmarketable for 6 months or more until the suit/notice is retired is not worth the $1,000 in earnest money they are fighting to keep. >>



Actually the title company would likely insure title and proceed to close the subsequent transaction as long as the Seller agreed to provide for a title indemnity, which is typically three times the disputed amount, $3K, which isn't that much.

saucywombat

In my practice this comes up every so often. In SC the money would have to be handed over by escrow agent (via interpleader action) to a magistrate judge (small claims) for a determination on who was owed the money. Law of contracts be damned - the judges will usually bend over backwards to give the money back to the buyer. Especially considering your standard form realtor contract is not designed to hold feet to the fire.

TNP777

<< <i>I am a lawyer and the money is owed to her if the contract was specifically contingent on the divorce. It's really simple. >>

This was my gut feeling as soon as I read the opening post. I am not a lawyer, but it seems that if the contract was written with the stipulation that the earnest money be returned in the event of the divorce being done by a certain date, then it needs to be returned. The real estate agency can try to bluster and not give the money back, but I'm not sure they can get away with it. I ran into a similar situation last year here in California where I had put down a $2000 earnest money deposit with a contingency written into the contract. The seller's agency tried to keep my deposit, but my Realtor and his agency pressed the issue and I had a check the next day.

PROMETHIUS88

Thank you all so much. I'm trying to get a copy of the contract to provide solid details. You guys are always great!

Tim

mike22y2k

In this kind of market that we are in right now, HOW STUPID WAS THE SELLER TO ALLOW A CONTINGENCY AT ALL.

I just closed on two properties a few weeks ago and there were a few times that I was able to just get out of the deal. After the inspection alll you have to do is demand all the things wrong with the house get fixed. Usually it can run in the 10'sK. Most sellers are cash poor and in no position to fix anything.

Just get in touch with the Title company and they will tell you how to proceed in getting her money back because it was written in.

Mike

earlycalguy

in a real estate contract you always need to know your 'out clauses'. it appears the divorce was an out clause and the money would be returned.

often you have specific dates you have to meet and once those dates past then that out clause goes away.

mcadams

Glad the OP could get some help, but why is this thread in the Sports Cards & Memorabilia forum?

WinPitcher

Why was your thread about you leaving in this forum?

stown

I am not a lawyer and laws vary from state to state.

Having said that, in my non-legal opinion, it depends on the contingencies. There's a difference between the Closing vs Earnest Money being contingent on the divorce. Hypothetically, if the Closing was contingent upon the divorce, in theory, Seller would be entitled to the EM but Buyer would have no obligation to Close.

On the other hand, if the Feasibility/Inspection Period was contingent on the divorce, then EM would be refunded to Buyer and both parties would have no further obligation to each other. If this is the case, a notice on legal letterhead can get Title Companies to release EM *very* quickly.

With all of that in mind, I highly recommend you contact an attorney with residential real estate experience prior to making any further contact with Seller or Title Company.

bishop

My advice, worth very little, would be never to rely on legal advice given on a baseball message board by folks, however well intentioned, who have not seen and read the underlying contractual documents..

Alfonz24

I am not a lawyer, but I did stay at a Holiday Inn Express ....

LodiBrewFan

wow