Re: It’s Not His Money! - Posted by JPiper
Posted by JPiper on April 22, 1999 at 21:36:06:
Here?s the wording from a local listing agreement: “SELLER AGREES TO: (e) Allow the BROKER to accept a deposit to be applied against the purchase price, and to place said deposit into the escrow account maintained by the BROKER or other Escrow Agent until closing of the transaction. In the event such deposit is forfeited by the buyer, 50% of said deposit shall be retained by the BROKER, provided, however, that said amount retained shall not exceed the amount to which the BROKER would be entitled as a commission, and the balance of said deposit then be paid to the SELLER.”
This is an agreement between the listing broker and the seller…a contract. Therefore, IF the seller in your case had signed an agreement of this type, the disposition of the earnest money is quite clear. $5K to the listing broker and $5K to the seller. If the seller wishes to give you $4K back, then this agreement would not preclude that. In that event, the disposition of earnest money would be $5K to the broker, $4K to you, and $1K to the seller. The constant here is that the broker is due $5K in any event, regardless of what you and the seller agree to.
Here?s what wouldn?t happen under this agreement. Seller agrees to give you $4K. That leaves $6K remaining. Now the seller wants to split $6K with the broker…leaving the broker with $3K, not the $5K provided for in the agreement.
Did the listing agreement contain language of this type? I don?t know, you don?t say. You probably haven?t seen it. There?s a decent chance the seller didn?t read it. There?s a decent chance that the seller figured he?d give you $4K and keep $6K…but the broker has balked…because that?s not what the listing agreement said.
Is the broker justified? He may well be, under the contract. Tough as it may seem, the party that seems to have no sound contractual footing under the contract is you. You mistakenly put up $10K earnest money with no financing contingency…and then couldn?t perform. Under the contract you?re entitled to 0. Again, the seller can agree to give you any portion of what he?s entitled to. He just can?t give you that which the broker is entitled to. Again, I would bet that the seller was NOT willing to settle for $1K, with you getting $4K and the broker getting $5K. I would bet that the seller was only willing to give you $4K if the broker didn?t get his $5K.
By the way, any dispute over earnest money would by state law preclude the broker from disbursing earnest money to anyone pending a resolution of the dispute. Therefore, the broker is simply complying with the law. A state audit will not reveal anything improper.
Is the broker ethical here? Again, I?ll leave that for you to decide…evidently you don?t think so. But if there is a contract similar to the one quoted above, the broker is well within his legal rights. The ethics I would question here (if the contract says something similar to the above) are the lawyers who are collecting fees by giving you and the seller bad advice. If a written contract means nothing, then what does that say about the parties? ethics?