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Mr. Feichthaler:
My wife and I recently contracted to sell our house to buyers from Michigan. They paid a $5,000 escrow deposit, which was held by the law firm handling the closing. The property passed inspection, the loan was approved, and we signed all the closing documents to transfer our house to the purchasers. The buyers were supposed to come to sign the documents this week and they never showed! The next day we received a letter from their lawyer saying we never had a contract to begin with, the loan wasn't approved, and that we didn't sign the deed on time. The buyers are demanding all of their escrow money back or they say we will have to go to court. Should we give it back?
Sharon R.
Dear Sharon:
The answer to your question will depend on the specific facts in this transaction. Generally, if you met all of your obligations in the contract as Seller, and there are no contingencies that would allow the buyer to keep their deposit, you should receive it. The law firm holding the escrow deposit will not disburse these funds, however, until you and the buyers reach agreement and sign a Cancellation and Release. Considering the loan was approved by the buyer's bank and they did not object to inspections, it is likely there are no contingencies that would allow the buyer to back out of the contract. If an agreement on the deposit still cannot be reached, these cases generally go to mediation first, which gives the parties the opportunity to meet face to face and attempt to resolve the dispute. In mediation, there is no judge, and no requirement that agreement be reached. The next step would be to go to court. In most real estate contracts, attorney's fees and costs are payable to the prevailing party, but judges have discretion in how much in fees are reimbursed.
Hopefully you can reach agreement on how the $5,000 will be distributed. If you cannot, seek professional assistance from an attorney to represent your interests. In the meantime, good advice to all sellers like you is to obtain a larger escrow deposit from the buyer that will motivate to complete the purchase of the property, rather than potentially lose their deposit on default.
Eric P. Feichthaler has lived in Cape Coral for over 37 years and graduated from Mariner High School in Cape Coral. After completing law school at Georgetown University in Washington, D.C., he returned to Cape Coral to practice law and raise a family. He served as mayor of Cape Coral from 2005-2008, and continues his service to the community through the Cape Coral Caring Center, and Cape Coral Kiwanis where he serves as president. He has been married to his wife, Mary, for 24 years, and they have four children. He earned his board certification in Real Estate Law from the Florida Bar, and primarily practices in real estate law and wills and trusts. He is AV Preeminent rated by Martindale-Hubbell for professional ethics and legal ability, and is a Supreme Court Certified Circuit Civil Mediator. He can be reached at eric@capecoralattorney.com, or 239-542-4733.
This article is general in nature and not intended as legal advice to anyone. Individuals should seek legal counsel before acting on any matter of legal rights and obligations.