"Kiss your $2,500 earnest money deposit goodbye"

by Maureen McCabe on September 10, 2007

dollar sign“Kiss your $2,500 earnest money deposit goodbye” was the headline of a column by Ilyce R. Glink on Inman  News recently.   It went on to ask “Is there any way buyers can get money back after canceling deal?”

Inman Real Estate News is subscription only so no link to the article.  Sorry.  Ilyce Glink is one of my favorite columnists on Inman News.  You can sign up via Inman News to receive her newsletter too.  I believe her column is still in the Columbus Dispatch on Sundays, in the homes section. 

Back to the  question of the $2500 earnest money deposit:

“Q: We found a house we wanted to buy and put down $2,500 in earnest money on the property. We wanted to close on Aug. 27.

The problem is that now we can’t close because according to the lender we don’t have enough funds.

The commitment letter clearly stated we needed $15,000 in gift funds to close. At the time of loan application, my parents promised to give to us this money, but now, due to unavoidable circumstances, they can’t.

We withdrew from our contract but now the seller’s lawyer is refusing to give us our earnest money back, citing bad faith.

Is there anything we can do to get our cash back? Our current attorney is not handling this matter the way we would have liked.”

Glink’s answer:

A: It isn’t the seller’s fault that you entered into a contract, promised you would close on a specific date, and now, due to a financial problem your parents are having, cannot close on the property.

It’s tough to say this, but you should have made sure that you had the funds you needed to close on the property.

Now that you don’t, you want the seller to give you the earnest money back. But that earnest money was his security that you were going to go through with the deal. He has taken the property off the market while you tried to scrape together the funds for closing. He has lost out on possible buyer interest and may wind up with less money because of your actions.

I don’t know what your contract says, but it’s entirely possible that the seller is entitled to keep your earnest money check as compensation for your canceling the deal. To get the funds back, you’ll have to sue, which may cost more than $2,500. For more details, please talk to a real estate attorney or a litigator.”

The good news in Columbus (Central Ohio) is that the contract is pretty buyer friendly, good news for buyers, bad news for sellers.  Read the contract.  Have your real etate attorney read the contract. 

More good news.  Most buyers do not put up $2,500 in earnest money in Central Ohio.  What is earnest money?

If sale doesn’t close, can money be refunded in FSBO deal

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MyRealLiving.com -  your own page  Choose me as your agent if you would like to work together to find a property! 

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November 19, 2007 at 10:15 am

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