Come on, Fellow Agents - Let's be Professional About Earnest Money Releases

I've had to threaten agents with contacting the Board of REALTORS in my county and lodging a formal complaint before the money was released!

I'm so glad Charita re-blogged this!  As long as it's not a question of legalities and simply a question of signatures, you're right -- get it signed and lets all move on!

This is a great discussion.  It is important not only to get the paperwork done, but done right.   When you are dealing in the short sale or foreclosure market, it could be hard to get the money back.

I agree. If the deal is not going to move forward, get the release signed as soon as possible to everyone can move on.

Hi Lance.  I have seen it from the other side...

As a listing agent, I can't make my sellers sign the agreement.  I would love them too, but some don't want to.  And we do represent them...

I fully understand the way you feel, however...

Ken

Yowza. 

If that happened in New York we'd have one hell of a lawsuit. Of course, lawyers hold deposits here, not brokers. 

Very frustrating. In Ohio, a Broker can only release earnest money in one of two ways. Either with a mutual release signed by both the buyer and seller, or by a court order. Our hands are tied. Our purchase agreements state as such, and I try to emphasize this portion of the PA with both my buyers and my sellers.

I hope by the time you read this you will have your signed release and the check is in the mail to your buyers!

In my area, the EMD isn't even deposited until the bank approves the short sale. No release necessary if the short sale doesn't work out.

Lance,

Most of our deals go through, only a handful of short sales in the entire Province of Ontario.

But, if the money is to go back, make it a priority and get it done. Everyone will appreciate that.

Brian

In California, buyer and seller must agree to a release of the deposit. HOWEVER, “A Buyer or Seller may be subject to a civil penalty of up to $1,000 for refusal to sign such instructions if no good faith dispute exists as to who is entitled to the deposited funds.” This is a quote from our standard purchase contract and it is part of the California Civil Code.

If there is a dispute of the legitimacy of the cancellation, let’s settle the dispute. If there is no dispute, hanging onto the buyer’s deposit money is an action of a small person and agents should discourage such activity by their clients.

In Arizona the EM release is unilateral. No contract, no deal. Otherwise I would imagine all the sellers lining up to get their hands on it.

We don't open escrow without a contract signed by the sellers BANK, with complete approval accomplished. Until everything is completely signed, it is an offer, not a contract.

I've been on both sides of this situation as well Lance. And yes, it is darned frustrating when personal grudges get in the way of the listing agent and/or the seller getting the release signed in a timely manner. If the contract allows for the buyer to walk, whether it be for inspection results, appraisal, loan approval, short sale approval, etc., then the escrow release MUST be signed! If the seller wants to try and hold onto money that isn't theirs to take, then they should put a non-refundable escrow clause in the contract. (Let's see how many buyers would line up for that one).

I always tell my sellers that we have multiple hurdles to jump in any contract before it's a DONE DEAL....and everything listed above is what I discuss. Generally, a good agent will explain all of this to a seller and get the release signed. It seems that you are dealing with an agent who may have a difficult seller and possibly is fanning the flames of the seller's frustrations over a fallen deal.

Good luck and hope you get that release soon!

I've had similar issues here in Florida, Lance.   We do have a procedure where we can notify the listing broker that we will release the money after xxxx days if they don't respond otherwise, should they not respond to our original requests.

Lance, unfortunately it's not just short sales.  I had one last year that went from October of the year before to the following August.  Nearly a year.  I had to squeeze the guy's broker to get the money back.  Oy!

Lance, this is not always a listing agent's fault. Many times the LA has difficulty communicating with the client as the seller may be upset the deal has fallen apart. As a buyer's agent, we must advise this can be an issue and deposit money can be held for an extended period of time until mutual consent or a court order (in PA, it became such a problem that the commission created a law that states if a deposit is held for more than 1 year without court action or continuous response from the seller, the buyer gets the money back by requesting it in writing - I summarized this). As a listing agent, we also must advise that deals can fall through and advise the seller obtain an attorney should they feel entitled to any deposit money. In a short sale, a buyer should not put a large deposit for the reason that sellers may not be very motivated to do much of anything during the process (let alone sign back deposit money). I will say this - it is aggravating as well that so many buyers have an "easy out" and bail on deals. The fact that there is a contract means very little anymore, so i can understand both sides to this. A buyer can alsways file legal action against the property and hold up any future sale, which should deter other buyers and title companies from insuring it.

Lance, check the laws in your state for holding funds in escrow. There may be other options for getting the money back if the seller won't sign.

Lance I wrote a similar post on this topic of release of earnest money and WHILE it is the buyer and seller who have signatures unfortunately some agents steer their clients the wrong way in holding back the money. EVERYONE should just follow the letter of the contract. Unfortunately this does not happen always. A split is a compromise even though it is truly unfair.

Hello Lance,

I see it from both side. The Listing side and the Buyers side. As a listing agent we try our darnedest to sell the property, but if it doesn't sell we move forward. From the Buyers end. If the deal isn't going to move forward. Seller...Sign the EMD and move forward.