Question: A few years ago a prospective buyers put 10 percent down as earnest money toward the purchase of our property. And at the request of our broker, the buyers provided signed documentation stating that the contract was not contingent on the sale of their other property. One day before closing they backed out because they could not get their property sold. Now they will not release the earnest money.

I was contacted by the title company that handled the transaction by letter stating they had money held in escrow that may be ours. This was no more than a cursory contact wanting to know if I would release these monies to the other party. What should I say?

Answer: The purpose of a contract deposit is to assure performance by the purchaser. By accepting an offer you may have lost an opportunity to sell the property to another buyer, perhaps one who would pay more or who would at least complete the contract. By depending on the buyers to complete the purchase you may have entered into an agreement to buy a replacement property or actually moved.

If it was me, I would do two things. First, I would not release the money -- once the money is released you have no leverage. Second, I would have an attorney or legal clinic review the sale agreement to see what damages and remedies might be available. I would look for damages in addition to the deposit, if possible. Third, I would check to see if the listing broker has any claim to the deposit, in whole or in part, because of the services he provided.

Your broker was smart to get a specific confirmation from the purchasers that they understood their obligation to perform regardless of whether or not they were able to sell their property.

These are the types of headaches we all wish would just go away, but only linger until someone backs down.

The Jay Shepherd Real Estate Update - RealtyTimes.com

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