Home Buying in 91355>Question Details

Outcry, Home Buyer in 91355

How to get escrow initial deposit($10K) in short sale after home buying contract's cancelled & seller refuses to sign on?

Asked by Outcry, 91355 Thu Apr 7, 2011

"Cancellati​on of contract"? In 2010 Sep., a bank approved our short sale deal. So, we opened an escrow account by depositing 10K to start our first home buying. Unfortunately, the seller never cooperated with us to finish the processing. There's no way for us to fnish the purchase, so we decided to cancel it. In 2010 Oct., we sent our sigend "Cancellati​on of Contract" to seller, but he refused to co-sign on it by threstening us while doing "potential" bankruptcy. I don't know why. Son of seller said he's a lawyer(?). Until now(2011 Apr.) we couldn't receive the deposit. My real estate agent says there's no way to get it without a lawyer's legal processing, but the lawyer fee is not small. Right now, I'm stuck. Could anyone please help me resolve this problem?
Thanks, S.K.

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Laura Coffey’s answer
In the purchase contract page 7 of 8 item 26 Dispute resolutions clearly states Buyer and Seller agree to mediation if any disputes. You have two choices if you did not remove all your contingencies and are within your rights.
1. File for mediation to get your deposit back or
2. File with small claims court. Currently maximum files on small claims is $7,500 so you would have to forgo $2,500
Getting everyone to sit down at a round table sounds good in theory but it sounds like things are heated at this point and that may not happen.
Have you asked for your money back and that the seller release it? Whenever you want something resolved the judge will ask you what you did thus far to get it back. You need to send a letter to the seller, the seller's agent, your agent, and the brokers involved. You need to state what you want, give them a dead line, and a consequence if they don't perform.
It absolutely never hurts to consult an attorney but check into filing mediation first, it's cheaper. Escrow is not allowed to release your deposit unless you have all signatures of parties involved or a judgement to do so. If you do talk to an attorney I would ask them about being able to still purchase the house if you want it. If the seller had an approved short and signed off on your offer excepting it, you have rights. If that didn't take place your agent never should have had you put $10,000 in escrow in the first place.
Good Luck.
3 votes Thank Flag Link Fri Apr 8, 2011
I'm sorry to hear this, its always difficult and frustrating to be in such a horrible position. If possible a meeting with the agents/brokers and both parties would be the cheapest way to go about but if things have escalated to a point where that no longer is an option then you might have to go to litigation. Sorry to hear that and I wish you the best of luck!
3 votes Thank Flag Link Mon Sep 16, 2013
Scary situation!
Flag Mon Sep 16, 2013
I have a question about this alex, I sent you an email!
Flag Mon Sep 16, 2013
It sounds like the seller may be holding off on the short sale process because of his threat of/pursuit of bankruptcy. If the seller wishes to proceed with a bankruptcy, he MUST stop the short sale process until the bankruptcy is either discharged or denied. The court will not allow both to proceed simultaneously. Then the process can begin again - but bankruptcy of course can take many, many months to complete. Perhaps the seller is trying to hedge the bet, and hang on to you as buyers through this process by refusing to release your deposit. Ethically, this scenario would be terrible behavior on the part of the seller. Legally, it would be a grey area.

Involvement of the broker of record on each side of the transaction, as Robert & Brian pointed out, is critical. If you executed a Short Sale Addendum with your contract, review that carefully with your agent and broker for verbiage that protects the buyer in such a transaction. Then ask your agent about key decisions that you made during the escrow period: Were contingencies removed? Did we issue a notice to perform to the seller? Has the approval letter from the bank expired because of seller actions? Did all parties agree to mediation?

Short sales are extremely challenging transactions, often with a lot of emotion and angst on the part of sellers. Sometimes the stress of their financial situation can cause sellers to act unreasonably. If a broker meeting and mediation are not available options, you will need to enlist the help of a real estate attorney. Try a relatively inexpensive approach first, such as a simple letter from the attorney to the seller demanding the return of your deposit.

Wishing you the best of luck in recovering your deposit, and moving on to a new home for your family very soon.

Crystal Sheppard
Sheppard Properties
661-298-0955
http://www.SCVHouseHunter.com
Crystal@CrystalSheppard.com
2 votes Thank Flag Link Fri Apr 8, 2011
On the California Residential Purchase Contract you initialed 4 times on 1 page, this is ALL about the Mediation / Arbitration option. In my opinion the seller has NO CASE whatsoever, but this is a cheap way for you to go to a pseudo court & not pay any big attorney fees.

Through your agents' Board of Realtors you can take this seller to a Mediation or Arbitration, the cost should be around $250-500 to do this process. Who cares what kind of lawyer the Son of the Seller is! Get this started now. Contact your agent & the broker of your agent.

EmilyKnell1@yahoo.com
562-430-3053 cell
Realtor Since 1996
2 votes Thank Flag Link Fri Apr 8, 2011
I'd try to arrange a meeting with all of the following: the seller's agent, your agent, and the broker for the seller's agent. Try to come up with a solution between you guys. Perhaps the broker for the sellers agent can influence the situation somehow? Other than that, it sounds like you were within your rights to cancel the purchase, as long as you had contingencies not yet removed (at least one or some), and or the short sale was unable to go through due to various reasons, ie. sellers actions/or lack of. Of course seeking legal advice is the best thing you can do...but, it isn't cheap, as you're already aware. Best of luck. I hope you're able to remedy this, and move forward with your 1st home.
Web Reference: http://www.TheScvAgents.com
2 votes Thank Flag Link Thu Apr 7, 2011
Closing instructions should tell what happens in this situation. At least ours does here in Colorado
1 vote Thank Flag Link Wed Apr 13, 2011
It would be best to consult an attorney but that can be expensive so I would first find out about filing a mediation which is a lot cheaper. The escrow company cannot release your deposit until they have signatures from both parties involved.
Also I am not very sure why your agent asked you to put $10,000 in escrow in the first place.

Good Luck.
David Akram
Realtor, DRE# 01891274
661-505-8550
Century 21 All Moves
Contact: http://contactme.davidnewhome.com
Web: http://www.DavidNewHome.com
Blog: http://blog.davidnewhome.com
FREE Monthly Newsletter: http://newsletter.davidnewhome.com
Web Reference: http://www.DavidNewHome.com
1 vote Thank Flag Link Wed Apr 13, 2011
First, I would start with calling your escrow officer to discuss your situation and demand to know the full story regarding your deposit. Ask if she/he has already released your deposit to the seller. Legally, the seller can not relist or sell his home unless you signed a release.

Did you sign a cancellation of your purchase contract and a release of your escrow funds? Did your contract clearly spell out ways you could lose your deposit if you didn't complete the purchase? Did your Realtor discuss the possibility of you losing your deposit if you didn't move forward?

I would request a meeting with all Realtors involved in your transaction. Maybe it would be worth it to meet at the escrow company so your escrow officer can attend the meeting. Ask for their help in recovering your deposit. If your meeting doesn't go well, explain you are going to seek a lawyer and everyone will be held responsible.

If no resolution with the Realtors or escrow, hire a Real Estate Lawyer. Many lawyers will do a free consultation. If you meet with an attorney, go very prepared with copies of everything you signed and agreed to. It may only take a consultation and a few letters sent to everyone involved for you to get your deposit back.

Keep in mind the maximum lawsuit in small claims is $7,500 so that wouldn't work for you.

Good Luck! If I can be of further assistance, call me at (661) 255-3335 or email me.

Cheryl Garner, Mortgage Expert
Fairview Mortgage Capital, Inc.
Email: cheryl@cherylgarner.com
Web Reference: http://www.cherylgarner.com
1 vote Thank Flag Link Sat Apr 9, 2011
Small claims court may end up being the best solution. The funds can not be returned without a release by both parties. Cooler heads do usually prevail and time is on your side. The seller knows that they have nothing to gain provided all terms of the contract are in your favor.
Web Reference: http://www.TonyLewis.com
1 vote Thank Flag Link Fri Apr 8, 2011
Robert is correct in this instance. It is also not appropriate for a seller to benefit in any way during a short sale process. The purchase agreement is written to protect you the buyer and as long as you did all you could do to perform in good faith per the agreement, a seller is not entitled to your deposit. Did you ever release any of your contingencies?

Try to get all parties together including the lizti g and selling brokers and see if you can come to a resolution. Don't be intimidated by the fact that somebody may or may not be a lawyer you're still within your rights. Most Situations like this can be the resolved with a meeting of the minds.
Web Reference: http://www.choosebrian.com
1 vote Thank Flag Link Fri Apr 8, 2011
This is a very difficult situation. If the home has gone to foreclosure, the seller has no urgency to sign off on the Cancellation. If it hasn't foreclosed, then you have a better chance. Because, if the seller wan'ts to sell to another buyer, then they will be entering a contract to sell to 2 different buyers. However, I do not know your entire situation and I am not a lawyer. I have to agree with your agent that you will be better off speaking with a Real Estate Attorney. Sorry I couldn't help more.
0 votes Thank Flag Link Wed Oct 2, 2013
Hi S. K.,

I am so sorry you are having to go through this!! Especially on your first real estate purchase.

I agree with what Laura Coffey said. If you and the seller signed page 7 of the contract item 26 then you and the seller agreed to mediation if any disputes come up.

Ask your agent to help you. File for mediation, and go to small claims court as well. You will need proof so put any requests or correspondence in writing. Or save any emails you have sent to anyone involved in the transaction.

I wish you the best of luck! Again I am so sorry you are going through this.

Please let us know how it all turns out.

I hope this helped!
0 votes Thank Flag Link Sat Sep 14, 2013
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