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Newbie here. I made an offer to a house with 5k earnest money. Upon inspection there were several items that required repair which the seller refused. Because of seller refusal I retracted my offer per the inspection contingency. However it has been six weeks and the seller refuse to release my earnest money. To make things worse the house has been relisted and has another contract signed. The listing agent and the seller are probably very close, and they are still holding EM. What should I do besides reporting the agent to the state board? TIA.

Edit 1:
1. The state is Illinois.
2. My attorney has recorded the contract. According to her, this is the closest to putting a lien.
3. The seller's listing company is a very small company. That's why we suspect the seller and broker are working together.
4. 'making things worse' because I was worried if they close anyway I will have no way to get money back.

Edit 2:
Sorry for taking me so long for the update. The managing broker of my agent contacted the managing broker of the seller's agent. The matter is being investigated by the brokers. Will keep you guys posted. Thank you for all the suggestions!

Edit 3 (Sep 20):
The managing broker of the seller's agent offered to help when we first contacted her and confidently promised she would have it investigated and resolved ASAP last week.
However, she texted this morning that there are uphills in the process and she couldn't help anymore. Then no response to our calls/texts. 
May need to file lawsuits. Any suggestions on this? Should I hire a new attorney for lawsuit? Thank you.

Member Summary
Most Recent Posts
So which was it, repair items that they refused to fix, or no washer and dryer?  These are two very different things. W... (more)

dcwilbur (Sep. 22, 2017 @ 12:47p) |

Whoa...first you said there were inspection defects that the seller refused to repair.

Now you are saying it was to do w... (more)

rascott (Sep. 22, 2017 @ 1:19p) |

Oh...can you get back earnest money if it is based on 'buyers remorse'?

forbin4040 (Sep. 22, 2017 @ 1:31p) |

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What state? file small claims.

I don't pay EMD until I waive inspection contingency

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Where's your agent or attorney in all of this?

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Let the escrow/title company/brokers know about your signed purchased contract and that EMD hasn't been returned. The agent doesn't matter and is likely an idiot, talk to their broker.

No title insurance company will ever insure the property until they give back your EMD. Because as long as they keep it they haven't voided your potential right to purchase the property.

Hopefully the broker will step in and fix it. Sounds like an idiot agent giving bad advice to their client about keeping your EMD that will potentially screw things up with the new buyer.

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It must vary by state because any time I have paid earnest money it was made out to the seller's real estate agency and held in an escrow account. Does the seller or the seller's agent have the money?

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Are they refusing to return the money and saying you for forfeited it for some reason per the contract?

Or are they just slow to write you a check?

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why does the house being under a different contract "make things worse"?

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How does the house going under contract again make things worse? If you are owed the money, you are owed the money.
mangyi said:   The listing agent and the seller are probably very close,
 

WTF is this all about, and what does it have to do with anything?
  

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fourchar said:   
No title insurance company will ever insure the property until they give back your EMD. Because as long as they keep it they haven't voided your potential right to purchase the property.
 

  If you cancel the contract, it's cancelled.  But it'll cause issues because that $5k creates a potential lien against the property.  In fact, give the agent 24 hours to hand you a check then go file a lien - before the new sale closes.

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IF the broker is a REALTOR, you can file a complaint with the local REALTOR office. While most members are brokers, not all brokers are REALTORS.

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Were you still in the inspection period when you discovered the needed repairs? What reason did the listing agent give you when you asked why the earnest money was not returned? Have you had your agent complain to the listing agents broker yet? You will want to pursue that before spending money on legal fees.

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If they close, don't you get to put a lien during escrow?

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All this talk about putting a lien. I don't understand how op can put a lien based on money held in escrow. Is there any specific federal/state law about this?

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If you're already working with a local real estate attorney, I would think they could offer the best advice. If they are ineffective, get another attorney. Hopefully you executed any provisions in the inspection contingency correctly and within the appropriate time windows.

Your options are basically:
1) Ask the seller and/or seller's agent. I guess you've already tried this. Follow-up with nastygram from attorney
2) Ask the broker or managing broker at the real estate firm. Possibly you can file a complaint with the real estate oversight board, if there is one.
3) Talk to escrow/title the seller is using and inform them of the issue. Note the seller could potentially switch to another escrow/title company, so it may not be foolproof.
4) Sue the seller and perhaps his agent.

Good luck

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rufflesinc said:   What state? file small claims.

I don't pay EMD until I waive inspection contingency

  Good luck not paying EMD till inspection contingency is waived.  That won't fly 95% of the time 

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sharpie130 said:   
rufflesinc said:   What state? file small claims.

I don't pay EMD until I waive inspection contingency

  Good luck not paying EMD till inspection contingency is waived.  That won't fly 95% of the time 

 well i've done it around 40 times and i can't remember a single time it hasn't worked.  no one has ever demanded the EMD check before lettting me do the inspection

step 1: get purchase agreement accepted
step 2: schedule and do inspection
step 3: if satisfied , pay emd.

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Send a email (written notice) to seller and their agent if earnest money is not released per contract (list material facts, dates, 5 days of inspection, cancelled on or before, etc.)
then you will at your choice execute any or all of:
a) File a Lien
b) Sue them in small claims with expenses to them
c) Report to managing broker (Manager of the sellers agent)
d) Report to Illinois Real Estate Licensing agency so sellers license is in jeopardy, it is a clear violation on sellers agent's side.
<Ensure above options are written on the letter>

Typically in IL, the check is written to seller agent's agency office and is put in an Escrow, that is not controlled by seller.

Do not involve your attorney, if they are involved they will charge for whole process too.
Most likely, agent | owner will come back; because new buyer will not get a mortgage or can't close with lein on.
 

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Tell the seller that you're filing a lis pendens which is legalese for pending litigation. That should tie up the property until it's resolved. At that point they'll probably give you the money back. Usually the only time I hold onto the earnest money is if the buyer doesn't perform to the contract. I've had people bail after the home inspection, but either took too long to notify me or didn't cite that they were withdrawing due to an unsatisfactory home inspection. Half the time I gave the money back anyway just to avoid legal entanglements.

As for the EMD, that probably varies from state to state. Some do an offer then a P&S, others just go right to P&S. Just depends on the custom/law of the state and the area.

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mangyi said:    I made an offer to a house with 5k earnest money. Upon inspection there were several items that required repair which the seller refused. Because of seller refusal I retracted my offer per the inspection contingency. However it has been six weeks and the seller refuse to release my earnest money. 
Why would you put a deposit on the house BEFORE having it inspected? Does the paperwork say the deposit is refundable? If not you're probably screwed. Does it say the house is sold as is with all defects? From the way you put it, the sellers refusal to make repairs just sounds like an out for you after you changed your mind for whatever reason. If for example the only thing you found was a burned out light bulb, and the seller refused to fix it, would that be an out to cancel the deal? The seller took the house off the market for you and may have lost potential customers. 5K is a small price to pay, and in theory, seller could sue you for specific performance to complete the sale.

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Just call the realtor and let him know if you don't have the earnest money refund by the end of the day today your heading down to the local court house to record the purchase agreement... Thus no company will issue title insurance until it's released.

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atikovi said:   
mangyi said:    I made an offer to a house with 5k earnest money. Upon inspection there were several items that required repair which the seller refused. Because of seller refusal I retracted my offer per the inspection contingency. However it has been six weeks and the seller refuse to release my earnest money. 
Why would you put a deposit on the house BEFORE having it inspected? Does the paperwork say the deposit is refundable? If not you're probably screwed. Does it say the house is sold as is with all defects? From the way you put it, the sellers refusal to make repairs just sounds like an out for you after you changed your mind for whatever reason. If for example the only thing you found was a burned out light bulb, and the seller refused to fix it, would that be an out to cancel the deal? The seller took the house off the market for you and may have lost potential customers. 5K is a small price to pay, and in theory, seller could sue you for specific performance to complete the sale.

  Obviously varies by contract.  Standard contracts here have an unrestricted option period that you pay a nominal amount for that you don't get refunded under any circumstances except maybe seller non-performance (say, $100 for 10 days).  The earnest funds can be paid up front or on a delay in the state'd realtor board standard contract form.  They're refunded if buyer backs out before unrestricted option period ends or due to one of many possible contingencies.

With unrestricted option period you can back out for any reason or for no reason at all.  The contract is for as-is.  But, you get it inspected during the unrestricted option period.  Then you negotiate if there are any inspection items that were not disclosed by seller but are acceptable if remedied.  Or you back out completely.

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henry33 said:   Tell the seller that you're filing a lis pendens which is legalese for pending litigation. That should tie up the property until it's resolved. At that point they'll probably give you the money back. Usually the only time I hold onto the earnest money is if the buyer doesn't perform to the contract. I've had people bail after the home inspection, but either took too long to notify me or didn't cite that they were withdrawing due to an unsatisfactory home inspection. Half the time I gave the money back anyway just to avoid legal entanglements.

As for the EMD, that probably varies from state to state. Some do an offer then a P&S, others just go right to P&S. Just depends on the custom/law of the state and the area.

  I thought I saw somewhere you were TX.  Isn't unrestricted option period and "as-is" contracts pretty standard here?  Assuming they had standard contracts:  If so they don't need to provide you a reason.  And if the inspection was after their option period ended, then they wouldn't have been able to back out due to it.

Edit: from reply, below, I see i was mistaken and you're Not texas, thus the other terms.

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Bend3r said:   
 Standard contracts here have an unrestricted option period that you pay a nominal amount for that you don't get refunded under any circumstances except maybe seller non-performance (say, $100 for 10 days).  


Why would any seller take their $500K house off the market for say, $100 for 10 days, and lose other potential buyers? A deposit is to hold the property until final payment can be made. If buyer can't/won't go through with the purchase, the deposit should go to the seller as liquidated damages. 

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I am in MA. We do an offer with an inspection contingency so it's normally 1k down with the offer and after the inspection, you do the P&S. I think in other states the inspection contingency is in the P&S. There are timelines and amounts that need to be met in order to cite the inspection contingency when withdrawing. I've had people make offers on a house with no inspection contingency but try to have something changed in the P&S and we refused so we kept their deposit because they didn't have an inspection contingency. Then we gave it back because the agent was a rookie and I knew the owner of the firm and he had lots of listing in the area. We've kept the money from other ones where they just changed their mind, that was either the wife didn't like it or the interest rate they got quoted was too high. Those weren't valid reasons for withdrawing.

Also lots of times a house will have some issues especially if it's an older house. Ones that have no issues are typically just 5-10 years old. Anything older and there's bound to be items anywhere in the 5-20k range to repair. That's just par for the course. Sometimes people just demand too much in repairs. If the seller made them all, the house would be worth more and they'd charge more. It's like trying to make an old car new again.

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rufflesinc said:   
sharpie130 said:   
rufflesinc said:   What state? file small claims.

I don't pay EMD until I waive inspection contingency

  Good luck not paying EMD till inspection contingency is waived.  That won't fly 95% of the time 

 well i've done it around 40 times and i can't remember a single time it hasn't worked.  no one has ever demanded the EMD check before lettting me do the inspection

step 1: get purchase agreement accepted
step 2: schedule and do inspection
step 3: if satisfied , pay emd.

  Depends on your state.  It is very very hard to get a deal accepted if you don't send in EMD within 2-5 days in illinois.  Then again, it takes almost no effort to get EMD back 99.9% of the cases.  I have done it well over a few hundred times and only on rare occasions where buyer is out of town or country have they allowed week or week plus for EMD.  

This money is in escrow...shouldn't be in someone's private account. risk isn't that high

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I can usually get inspection done within five days

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henry33 said:   I am in MA. We do an offer with an inspection contingency so it's normally 1k down with the offer and after the inspection, you do the P&S. I think in other states the inspection contingency is in the P&S. There are timelines and amounts that need to be met in order to cite the inspection contingency when withdrawing.
Got it. I mistakenly remembered tx. I know other states have different customary terms.

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ruffles, that timing and seller willingness to wait for a deposit surely depend a lot on the local market. In a booming one, it may take longer to get time from a good inspector, and sellers may be pickier if they typically get multiple strong offers.

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atikovi said:   
Bend3r said:   
 Standard contracts here have an unrestricted option period that you pay a nominal amount for that you don't get refunded under any circumstances except maybe seller non-performance (say, $100 for 10 days).  


Why would any seller take their $500K house off the market for say, $100 for 10 days, and lose other potential buyers? A deposit is to hold the property until final payment can be made. If buyer can't/won't go through with the purchase, the deposit should go to the seller as liquidated damages. 

  Why would any buyer drop hundreds of dollars on inspections if the house can be sold out from under them?  The whole idea is it's a done deal, as long as the house checks out.  A seller doesn't have to take the house off the market, often they continue soliciting backup offers.  And it's the seller's option which offer they accept; it's the whole reason why all cash (no financing contingency) or as-is (no inspection contingency) offers are considered stronger and more desirable. 

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rufflesinc said:   sharpie130 said:   
rufflesinc said:   What state? file small claims.

I don't pay EMD until I waive inspection contingency

  Good luck not paying EMD till inspection contingency is waived.  That won't fly 95% of the time 

 well i've done it around 40 times and i can't remember a single time it hasn't worked.  no one has ever demanded the EMD check before lettting me do the inspection

step 1: get purchase agreement accepted
step 2: schedule and do inspection
step 3: if satisfied , pay emd.


I require EM within 48 hours of contract.....and home doesn't go pending on MLS until it's received. That's standard practice in our market. And also standard when buying a REO (Fannie) or HUD.

If you are buying distressed property from owners, maybe they are more flexible. Would never fly in a hot market, however.

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Love the posts where the op disappears after initial post and we post response after response for things such as a real estate contracts which are subject to state laws.

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ach1199 said:   Love the posts where the op disappears after initial post and we post response after response for things such as a real estate contracts which are subject to state laws.
  
I was going to post the skeleton jpeg that says "OP will update, we just have to wait."

Except, in this case, OP did return (albeit with just an edit to the original post), and updated that the state is Illinois and a few other crucial details.

 

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$5k earnest money? why?
earnest money can typically be any amount, or even anything of value.
i think my first home, i put $100 of earnest money up with the offer

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More earnest money makes the buyer more committed to follow through with the purchase. Standard contracts where I am still leave a buyer with lots of fairly easy opportunity to back out, but there really are only a few specific reasons that allow the buyer to cancel without losing the deposit. We made a $10k deposit on one, with a price of about $500k. It's like a cash only offer or waiving other contingency, sellers know that this offer is a little more likely to be completed.

With a deposit of $100, I'd think buyers have no effective commitment to the transaction. Smart ones will keep shopping at full speed and hop on a better deal if they see it, all the way up through closing.

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skh12 said:   
i think my first home, i put $100 of earnest money up with the offer

 did you buy your first home 50 years ago

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rascott said:   
rufflesinc said:   
sharpie130 said:   
rufflesinc said:   What state? file small claims.

I don't pay EMD until I waive inspection contingency

  Good luck not paying EMD till inspection contingency is waived.  That won't fly 95% of the time 

 well i've done it around 40 times and i can't remember a single time it hasn't worked.  no one has ever demanded the EMD check before lettting me do the inspection

step 1: get purchase agreement accepted
step 2: schedule and do inspection
step 3: if satisfied , pay emd.


I require EM within 48 hours of contract.....and home doesn't go pending on MLS until it's received. That's standard practice in our market. And also standard when buying a REO (Fannie) or HUD.

 

 o around here, the listing goes pending as soon as seller signs purchase agreement. EMD or no EMD, inspection or no inspection

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rufflesinc said:   
rascott said:   I require EM within 48 hours of contract.....and home doesn't go pending on MLS until it's received. That's standard practice in our market. And also standard when buying a REO (Fannie) or HUD.

 

 o around here, the listing goes pending as soon as seller signs purchase agreement. EMD or no EMD, inspection or no inspection

Must be market-specific.
Here it goes pending when the earnest money is received.

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"Pending - other" when offer accepted.
"Pending - under contract" when emd received.

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ahcool said:   All this talk about putting a lien. I don't understand how op can put a lien based on money held in escrow. Is there any specific federal/state law about this?
The earnest money is a payment securing the purchase of the property, so a lien against said property would seem appropriate, but you are correct in that it may or may not actually be enforceable.  But either way, it's existence will risk blowing up the subsequent sale and give the seller a lot of incentive to stop dodging the matter.

Skipping 30 Messages...
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Oh...can you get back earnest money if it is based on 'buyers remorse'?

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