Comments on: Earnest Money – Where does it go and when? http://raincityguide.com/2006/02/25/earnest-money-where-does-it-go-and-when/ Seattle's Leading Resource for Real Estate Information Tue, 16 Mar 2010 19:56:54 -0700 http://wordpress.org/?v=2.8.4 hourly 1 By: ARDELL http://raincityguide.com/2006/02/25/earnest-money-where-does-it-go-and-when/#comment-345120 ARDELL Sun, 21 Feb 2010 17:19:49 +0000 http://raincityguide.com/2006/02/25/earnest-money-where-does-it-go-and-when/#comment-345120 Sue, I think you need to see the house to determine what condition it is in and you need to see an attorney if you want more than your Earnest Money back or if you want to do something less than your contract calls for you to do. Your comment is entirely based on what other people are saying. If your contract grants an automatic 10 days after closing for the seller to perform, and the teenagers did not cause any real damage (everyone's definition of "trashed" is different) the answer would be different. The average contract does not give 10 days, so yours may have been specific to this seller's situation or the local contracts where you live may be different. You need to find or have the agent point out where in the contract it says you must give them 10 days, not simply rely on what someone "said". You need to request a visual inspection of the property to determine if and to what extent repairs are needed, not rely on a neighbor's verbal representation of the home's interior condition. Consult an attorney immediately. Given you have already signed your papers at closing, if you already brought all of your funds to close to closing as well, this could close without your further consent. You likely have to do something to stop it and you could lose your Earnest Money if you do not do it correctly and within the contractual time limits. This is about your specific obligations under your specific contract. So bring that contract to an attorney ASAP and if possible, try to get in to the property today so that you can tell the attorney what the condition is beyond "the neighbor said they trashed it". Sue,

I think you need to see the house to determine what condition it is in and you need to see an attorney if you want more than your Earnest Money back or if you want to do something less than your contract calls for you to do. Your comment is entirely based on what other people are saying. If your contract grants an automatic 10 days after closing for the seller to perform, and the teenagers did not cause any real damage (everyone’s definition of “trashed” is different) the answer would be different.

The average contract does not give 10 days, so yours may have been specific to this seller’s situation or the local contracts where you live may be different. You need to find or have the agent point out where in the contract it says you must give them 10 days, not simply rely on what someone “said”. You need to request a visual inspection of the property to determine if and to what extent repairs are needed, not rely on a neighbor’s verbal representation of the home’s interior condition.

Consult an attorney immediately. Given you have already signed your papers at closing, if you already brought all of your funds to close to closing as well, this could close without your further consent. You likely have to do something to stop it and you could lose your Earnest Money if you do not do it correctly and within the contractual time limits. This is about your specific obligations under your specific contract. So bring that contract to an attorney ASAP and if possible, try to get in to the property today so that you can tell the attorney what the condition is beyond “the neighbor said they trashed it”.

]]> By: Sue http://raincityguide.com/2006/02/25/earnest-money-where-does-it-go-and-when/#comment-345109 Sue Fri, 19 Feb 2010 07:57:06 +0000 http://raincityguide.com/2006/02/25/earnest-money-where-does-it-go-and-when/#comment-345109 I would appreciate any information anyone can give. Our home transaction has gone terribly wrong. We signed our closing papers with escrow on Tuesday and Wednesday morning our RE agent told that the seller had gone bankrupt and did not have legal right to sell the house. Then the agent told us we are still bound by contract until ten days past the closing date, till 2-27-10. Giving the seller time to get court approval to sell. We have also been told she is dangerously close to foreclosure as well. We checked out the house and a neighbor told us that she had left teenagers in the home unattended for a few weeks and they trashed the home. We no longer want this house because of the condition and the costs to repair it. When will this seller be considered to be in breach of contract and what remedy do we have? We would like to be free of this mess and recover our costs, earnest money, inspection fees, and appraisal fees. I would appreciate any information anyone can give. Our home transaction has gone terribly wrong. We signed our closing papers with escrow on Tuesday and Wednesday morning our RE agent told that the seller had gone bankrupt and did not have legal right to sell the house. Then the agent told us we are still bound by contract until ten days past the closing date, till 2-27-10. Giving the seller time to get court approval to sell. We have also been told she is dangerously close to foreclosure as well. We checked out the house and a neighbor told us that she had left teenagers in the home unattended for a few weeks and they trashed the home. We no longer want this house because of the condition and the costs to repair it. When will this seller be considered to be in breach of contract and what remedy do we have? We would like to be free of this mess and recover our costs, earnest money, inspection fees, and appraisal fees.

]]> By: ARDELL http://raincityguide.com/2006/02/25/earnest-money-where-does-it-go-and-when/#comment-345103 ARDELL Thu, 18 Feb 2010 08:40:17 +0000 http://raincityguide.com/2006/02/25/earnest-money-where-does-it-go-and-when/#comment-345103 Tammy, Call the Broker of the office your agent is with or walk into the office and ask to speak with someone about it. There is not enough detail here as to why it didn't close, and whether or not you have a legal "out". Also it doesn't make sense that the money "came back" but you didn't receive it. Perhaps the office broker or manager can sort it out better for you. If that doesn't work you should see an attorney, but I can't tell from what you have said if you should get your money back or not. Tammy,

Call the Broker of the office your agent is with or walk into the office and ask to speak with someone about it. There is not enough detail here as to why it didn’t close, and whether or not you have a legal “out”. Also it doesn’t make sense that the money “came back” but you didn’t receive it. Perhaps the office broker or manager can sort it out better for you. If that doesn’t work you should see an attorney, but I can’t tell from what you have said if you should get your money back or not.

]]> By: tammy http://raincityguide.com/2006/02/25/earnest-money-where-does-it-go-and-when/#comment-345101 tammy Thu, 18 Feb 2010 05:51:07 +0000 http://raincityguide.com/2006/02/25/earnest-money-where-does-it-go-and-when/#comment-345101 i'm a house buyer and i was purchasing on this house but it didn't went through so i ask my agent to get my deposit money back and it did came back. Then i told her that i woudn't use her anymore and just want to come by to get my money back then she went mad and told me that i won't able to get my money back, what should i do now beside taking her to court? i’m a house buyer and i was purchasing on this house but it didn’t went through so i ask my agent to get my deposit money back and it did came back. Then i told her that i woudn’t use her anymore and just want to come by to get my money back then she went mad and told me that i won’t able to get my money back, what should i do now beside taking her to court?

]]> By: ARDELL http://raincityguide.com/2006/02/25/earnest-money-where-does-it-go-and-when/#comment-342453 ARDELL Thu, 13 Aug 2009 03:51:09 +0000 http://raincityguide.com/2006/02/25/earnest-money-where-does-it-go-and-when/#comment-342453 Hi Kendall, The Earnest Money doesn't "come back into your hands". It comes back to "the table" and applied as a credit against your total cash needed to close. Let's say you are paying $200,000 for a condo and your lender fees are $3,500 and other expenses $2,500 and downpayment is $7,000. If the seller is paying your closing costs of $6,000 and your Earnest Money is $2,500, then you need to bring the difference of $4,500. If you are paying your own closing costs then you need your closing costs of $6,000 plus the downpayment of $7,000 less the Earnest Money deposit. So yes, it can be used for downpayment...but don't forget about the closing costs :) The Earnest Money is a credit at closing against the total monies you need to bring to closing, including the downpayment. Hi Kendall,

The Earnest Money doesn’t “come back into your hands”. It comes back to “the table” and applied as a credit against your total cash needed to close.

Let’s say you are paying $200,000 for a condo and your lender fees are $3,500 and other expenses $2,500 and downpayment is $7,000. If the seller is paying your closing costs of $6,000 and your Earnest Money is $2,500, then you need to bring the difference of $4,500.

If you are paying your own closing costs then you need your closing costs of $6,000 plus the downpayment of $7,000 less the Earnest Money deposit.

So yes, it can be used for downpayment…but don’t forget about the closing costs :)

The Earnest Money is a credit at closing against the total monies you need to bring to closing, including the downpayment.

]]> By: Kendall B. http://raincityguide.com/2006/02/25/earnest-money-where-does-it-go-and-when/#comment-342428 Kendall B. Wed, 12 Aug 2009 04:42:30 +0000 http://raincityguide.com/2006/02/25/earnest-money-where-does-it-go-and-when/#comment-342428 I know the earnest money will come back into my hands, but coming up with the down payment is a little tight for a condo we want to buy (hooray FHA). If the offer is accepted and the earnest money comes back to us, does it go to the payment of the house or can we use it for the down payment like what we were depending on? Thanks :) I know the earnest money will come back into my hands, but coming up with the down payment is a little tight for a condo we want to buy (hooray FHA). If the offer is accepted and the earnest money comes back to us, does it go to the payment of the house or can we use it for the down payment like what we were depending on?

Thanks :)

]]> By: ARDELL http://raincityguide.com/2006/02/25/earnest-money-where-does-it-go-and-when/#comment-341670 ARDELL Tue, 14 Jul 2009 04:45:37 +0000 http://raincityguide.com/2006/02/25/earnest-money-where-does-it-go-and-when/#comment-341670 <p>"The lender says we are in default and will get sued if we back out."</p> <p>That's an odd statement for a lender to make. Your contract will tell you the answer. There should be a "liquidated damages" clause as to whether the Earnest Money is the limit that anyone can come after you for damages. I'm assuming you are not local or I could tell you where to look. </p> <p>If your loan application is in both names, you should be able to press the lender for a written response to the application as made. They can't force you to apply differently, and should produce the denial letter you need.</p> <p>You should go to an attorney with your contract regarding liquidated damages and the finance contingency. A simple letter from an attorney shouldn't cost much and the attorney can get the denial letter and also send it to the Broker, being sure to comply with the terms of the finance contingency. Make sure you go to an attorney who specializes in minor real estate matters so it won't cost much. One who is very familiar with the standard real estate contracts.</p> <p>I think what you are running into is people don't understand why not? Why would you not want to buy the place for this reason? I think that is why you are getting the reaction that you are getting. They pull wives and husbands off the loan process very often, without anyone caring. I expect that you care so much...so much so that you no longer want the property as a result, is confusing and frustrating them. Still no reason for them to be that coercive, but I think that's what is happening.</p> “The lender says we are in default and will get sued if we back out.”

That’s an odd statement for a lender to make. Your contract will tell you the answer. There should be a “liquidated damages” clause as to whether the Earnest Money is the limit that anyone can come after you for damages. I’m assuming you are not local or I could tell you where to look.

If your loan application is in both names, you should be able to press the lender for a written response to the application as made. They can’t force you to apply differently, and should produce the denial letter you need.

You should go to an attorney with your contract regarding liquidated damages and the finance contingency. A simple letter from an attorney shouldn’t cost much and the attorney can get the denial letter and also send it to the Broker, being sure to comply with the terms of the finance contingency. Make sure you go to an attorney who specializes in minor real estate matters so it won’t cost much. One who is very familiar with the standard real estate contracts.

I think what you are running into is people don’t understand why not? Why would you not want to buy the place for this reason? I think that is why you are getting the reaction that you are getting. They pull wives and husbands off the loan process very often, without anyone caring. I expect that you care so much…so much so that you no longer want the property as a result, is confusing and frustrating them. Still no reason for them to be that coercive, but I think that’s what is happening.

]]> By: HELP!!!--clarity http://raincityguide.com/2006/02/25/earnest-money-where-does-it-go-and-when/#comment-341669 HELP!!!--clarity Tue, 14 Jul 2009 03:34:08 +0000 http://raincityguide.com/2006/02/25/earnest-money-where-does-it-go-and-when/#comment-341669 The above came out wrong. I HAVE been qualified without her on the financing, but we do not want to follow through with the deal if this is the only way to finance. They say I can put her on the title, but not the loan. The contract states " buyer" must secure loan. So are "we" the buyer ? The above came out wrong. I HAVE been qualified without her on the financing, but we do not want to follow through with the deal if this is the only way to finance. They say I can put her on the title, but not the loan. The contract states ” buyer” must secure loan. So are “we” the buyer ?

]]> By: HELP!!! http://raincityguide.com/2006/02/25/earnest-money-where-does-it-go-and-when/#comment-341668 HELP!!! Tue, 14 Jul 2009 03:19:08 +0000 http://raincityguide.com/2006/02/25/earnest-money-where-does-it-go-and-when/#comment-341668 My girlfriend and I put an offer on a home as the"buyer". We wanted to be on the loan together, not just one of us on the loan.Together we do not qualify, however I qualify on it by myself. We don't want the house if we can't both be on the loan. Since WE are listed as the BUYER on the contract, and WE have a financing contingency, can we be held in default if we do not want the house with just me on the loan? I do qualify without her? The lender says we are in default and will get sued if we back out. The earnest money came out of her account, not mine. After we paid the earnest money the lender had her put my name on the account.We are not as worried about losing are earnest $ as we are getting sued by the broker. My girlfriend and I put an offer on a home as the”buyer”. We wanted to be on the loan together, not just one of us on the loan.Together we do not qualify, however I qualify on it by myself. We don’t want the house if we can’t both be on the loan. Since WE are listed as the BUYER on the contract, and WE have a financing contingency, can we be held in default if we do not want the house with just me on the loan? I do qualify without her? The lender says we are in default and will get sued if we back out.

The earnest money came out of her account, not mine. After we paid the earnest money the lender had her put my name on the account.We are not as worried about losing are earnest $ as we are getting sued by the broker.

]]> By: ARDELL http://raincityguide.com/2006/02/25/earnest-money-where-does-it-go-and-when/#comment-341439 ARDELL Sun, 05 Jul 2009 06:50:02 +0000 http://raincityguide.com/2006/02/25/earnest-money-where-does-it-go-and-when/#comment-341439 <p>How did the business owner learn this during a short escrow vs. before they made the offer? Seems a bit convenient given "the letter" comes from the business owner that creates the loan denial.</p> <p>A case could be made either way, so the mediator will look at the facts, more than you have provided here, and decide. Often they ask you to compromise. If the seller sells the house shortly at the same price, then perhaps the seller will simply release it. </p> <p>Hard to say on this one. Anybody's guess, really. Best is to put yourself in the seller's shoes. How long did they live thinking their home was sold? A few days? Did you cancel the day before closing. Both sides of the story need to come out, not just one side.</p> How did the business owner learn this during a short escrow vs. before they made the offer? Seems a bit convenient given “the letter” comes from the business owner that creates the loan denial.

A case could be made either way, so the mediator will look at the facts, more than you have provided here, and decide. Often they ask you to compromise. If the seller sells the house shortly at the same price, then perhaps the seller will simply release it.

Hard to say on this one. Anybody’s guess, really. Best is to put yourself in the seller’s shoes. How long did they live thinking their home was sold? A few days? Did you cancel the day before closing. Both sides of the story need to come out, not just one side.

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