escrow deposit dispute and inspection clause - Posted by eric

Posted by Brandi_TX on April 10, 2000 at 15:20:57:

Memorandum of Agreement (Conserning Real Property)…

Even though this buyer no longer agrees to purchase the home, there are still matters in the agreement that have not been tended to. (The return of the Earnest Money) Seems to me, recording a memorandum would do just fine in getting some attention. It’s only purpose is to put the world (read Title Companies) on notice that there is an issue that needs to be resolved.


escrow deposit dispute and inspection clause - Posted by eric

Posted by eric on April 09, 2000 at 11:33:03:

I was trying to buy a house to live-in, nothing really special about it, I just liked the area. Very vanilla deal, we have good income and credit so were able to get in for low down, low interest. Well, I made the offer subject to appraisal & inspection, and made the seller pay for the appraisal to be reimbursed at closing. After that came the inspection, which revealed bad septic and bad roof. Sellers didn’t want to fix it, so I sent them a letter saying I didn’t approve of the inspection, and basically the deal was off and I want my deposit back. Now they are screwing around with that as well, saying that they want to be reimbursed for the appraisal, even though we aren’t going to closing. I live in Florida, where disputes like this are referred to the Florida Real Estate Commission. Has anyone had any similar experiences like this, or advice to share? What about a memorandum of contract? I was thinking about recording one just to make sure they don’t sell the house to someone else in the meantime, unless and until I get my money back. Any thoughts or suggestions?

Re: escrow deposit dispute and inspection clause - Posted by Troy M

Posted by Troy M on April 10, 2000 at 08:10:43:

Hi Eric,

In my area, you can file a small claims suit for about $45 bucks, and you don’t necessarily need an attorney. (I don’t use one for a small claims suit, but you may want to). Often times, just the filing will prompt the other party to resolve the situation, if you can make a strong case for your self, i.e. the contract clearly states that you should receive your earnest money back. If your contract isn’t clear on that,…well?

Good Luck,
Trpy M

Re: escrow deposit dispute and inspection clause - Posted by ScottE

Posted by ScottE on April 09, 2000 at 17:06:57:


As Jim mentioned, we don’t have the luxury of seeing your contract. The language in the contract, especially with respect to your appraisal and inspection clause, is going to be the kicker. So, did your contract say “Subject to appraisal and inspection” OR “subject to appraisal and inspection satisfactory to buyer” ? See the difference? The first quote just says that an appraisal and inspection will be done. The second quote states that those items must be satisfactory to you.

Good luck


Re: escrow deposit dispute and inspection clause - Posted by Jim IL

Posted by Jim IL on April 09, 2000 at 16:42:35:

Seems to me that recording a memo would not be a good idea.
By recording a memo you are stating that you have an agreement to buy the home.
And that is not the case here.
You are trying to tell the seller there is no agreement and that is why you want your deposit back.
The best thing to do now may be to write a strongly worded letter to them, advising them that you want your money back or you will seek any and all legal remedy.
Maybe even have your attorney write it for you, this carries more weight to most people.
Rattle there cage a bit and see what happens?

And, how did you pay them, and what did the contract say about that?
Was it a check? can you still stop payment on it?
What did the contract say about keeping the earnest money and how it was to be handled?

And lastly, how much was it?
If it was small, like $100, then I’d personally just write the letter myself and see what they do?
If they fail to give it back, don’t sweat it, $100 is not worth it.
But, if it is more, then do what you have too and get your money.
Just do not waste too much time or money to get it back.

Just my $.02,
Jim IL

Re: escrow deposit dispute - Posted by JPiper

Posted by JPiper on April 09, 2000 at 16:40:35:


There are a lot of unanswered questions that arise from your post. So by necessity, this will have to be a general answer.

First, the contract controls the disposition of earnest money. None of us here have the benefit of seeing that contract. Chances are there is an earnest money clause that may refer to the disposition of earnest money in various circumstances. You might also want to check the default provisions of the contract to see whether when you terminated the contract you did so within the manner specified in the contract.

Another important question is where is the earnest money? Is the earnest money currently held in a broker trust/escrow account? A title company account? Or did you give the seller the earnest money directly?

Regardless, the chances are high that the Florida REC does not handle contractual disputes concerning earnest money. (I?m not familiar with Florida real estate law, but this would be very unlikely). The REC would typically handle licensee infractions concerning earnest money deposits?.but not contractual disputes between buyer and seller.

So the way I would handle this is to make a formal written demand for the earnest money addressed to the party that is holding the earnest money. If your contract provides for a different method then follow that?but chances are that this is the required first step. If the party holding the money is a broker or title company then typically they will require a formal written release to be executed by both seller and buyer, a release which would release both the property and the earnest money. If both parties do not, or will not, execute such an agreement, the title company or broker will probably hold the earnest money in accordance with the contract until there is an agreement or a court ruling or arbitration ruling providing for the disposition.

If the seller is currently holding the money, then obviously the money is being held without the benefit of rules that would typically control trust accounts. This is a no-no?.and hopefully you did not give the seller the money directly.

If your formal written demand does not produce results?.recording a memorandum will cloud the title. However, don?t assume this is foolproof. Properties get sold despite have recorded memorandums. In one county I deal in, for example, last minute recordings many times aren?t picked up by the title company because of the backup at the county courthouse.

Probably a more direct approach is to file a lawsuit and record a lis pendens. The result of this is that the property will be tied up until the lawsuit has been dealt with. The threat of this will many times serve to force the seller into an agreement about the earnest money. If you have to actually file a suit though, an attorney will be required, and therefore you will incur a cost. You might want to weigh these costs versus the amount of earnest money at stake. An attorney should be able to file a ?bare bones? suit somewhat inexpensively. Recording a lis pendens is cheap.

When I get involved in a dispute, my general reaction is to tell the other party what I intend to do, and what impact that is going to have on their situation. I do this in great detail. If necessary, I follow this up with a letter from my attorney?letters are cheap too. Normally this is enough to produce results?.but not always. When you reach this point, you sit down with a pencil and figure out whether it?s worth pursuing legally. Many times it isn?t. Throwing good money after bad normally doesn?t make sense, all other things being equal.

A good rule of thumb regarding earnest money is to never put up money you can?t walk away from. Keep it small?.or put it up in stages as you complete parts of your due diligence.