Home Buying in Torrance>Question Details

Cloud, Home Buyer in Gardena, CA

to cancel the escrow, all we need is both seller and buyer's signature to get the earnest money back?

Asked by Cloud, Gardena, CA Sat Nov 13, 2010

I just want to find out if earnest money will be fully refunded to buyer if cancellation was requested with 17days and no contingencies were removed in writing. Reason for the cancellation is per mutual agreement.

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Denny Jeremic’s answer
Since no contingencies were removed in writing, and it was within the 17 day contingency period as stated on the purchase contract, your are entitled to your entire earnest money deposit back, regardless of the reason. The key thing is that no contingencies were removed in writing. Until that happens, the seller has no real hold over your deposit. But if this was a condo, escrow might with hold a fee for CC&R's and other home owners documentation that they were charged for. But if you return the CC&R's and other homeowners documentation you were provided, you will be refunded that money once that house sells.
Only thing that you will not get back is the money you spent on an appraisal, if you ordered one that is.
Web Reference: http://www.Dennyjeremic.com
1 vote Thank Flag Link Sat Nov 13, 2010
If both buyer and seller agree to terminate the contract, and both agree on the release of deposit back to the buyer, then the escrow agent should release the deposit as instructed by both parties.
Web Reference: http://www.PamCrawford.com
2 votes Thank Flag Link Sat Nov 13, 2010
Hi Cloud, I assume by now this has all been cleared up; however, if not, also consider the following:

You did not mention the amount of deposit being held. You should also be aware that the CA CAR Residential Purchase Agreement has a "mitigation of legal risk" protection via Para 26C1. While Para 26 (Dispute Resolution) speaks to the arbitration and mediation of disputes, Para 26C(1) allows you to bypass Arbitration/Mediation if your damages are within Small Claims Court jurisdiction, $5K or $7.5K depending on whether you are suing a corporation or individual.

If you want to read up on Arbitration/Mediation I would suggest you review Kenny Tan’s blog post on the subject as it’s somewhat rare to have a lawyer’s perspective here on Trulia. The direct link is: http://www.kennytanlawblog.com/tp-100724063949/post-10122114…

Best, Steve
0 votes Thank Flag Link Wed Feb 2, 2011
Hi Cloud:

As long as you did not sign the Contingencies Removal form, you can still receive your EMD back even if it's the 28th day. Since it's a mutual agreement, and it's stated so on the cancellation contract, you have nothing to worry about. I agree at some of the answers below tho, some escrow companies might charge a cancellation fee (which I find it ridiculous to do so) and/or if they have paid for some expenses on behalf of you already.

Feel free to contact me directly if you have any further questions.
Helen Chong, GRI, ABR®, e-PRO®, SFR, CDPE
0 votes Thank Flag Link Tue Feb 1, 2011
As long as both seller and buyer are mutually agreeable to cancel the contract, the earnest money should be refunded less costs, incurred unless parties agreed otherwise. There could be escrow cancellation costs unless waived by the escrow company.
0 votes Thank Flag Link Wed Nov 17, 2010
As with most real estate related questions, we need lots of details to give you a clear answer.

Just because you claim that the seller is willing to "cancel per mutual agreement" that does not guarantee that they also agree to return your deposit. They can agree to one without the other. By contract they should agree to this, but that doesn't mean that they will. Although rare, I have seen stubborn sellers that want compensation (even with short sales). So did they already agree in writing to cancel and return your deposit?

And Shel-lee is correct. Escrow has performed a service on your behalf and they can charge you a fee. Many do not, but they can and some do.

Are you represented by a Realtor? If you aren't getting the information that you need, then speak to their Broker.
0 votes Thank Flag Link Mon Nov 15, 2010
Hi Cloud, I agree with Shel-lee's approach to the question; meaning, details matter!

Escrow Cancellation Fee-
The State of CA's Department of Insurance Bulletin No. NS-35E (dates back to 1965-66) allows the Escrow company to charge a fee. However, in my discussions with the CAR lawyers, you can fill out the contract cancellation in a way that prevents this (ask your Realtor to call the CAR lawyers for how this is done!).

Good Faith-
Aside from the cancellation fee possibly putting a portion of your deposit at risk you also have "good faith" considerations. One of the primary changes in the 4/10 version of the CAR Residential Purchase Agreement was the specifically-stated incorporation of acting in “good faith”. Definition: http://research.lawyers.com/glossary/good-faith.html If the Seller believes you have not acted in good faith they can certainly make a claim for damages against you. Again, definitively stating an opinion on whether you have legal exposure regarding “good faith” in your specific case is up to a lawyer at this point. While “good faith” is assumed throughout the contract, the following sections specifically refer to “good faith” (capitalization added by poster):

3H. Loan Terms; (2) Loan Contingency: Buyer shall act diligently and in GOOD FAITH to obtain the designated loan(s). Obtaining the loan(s) specified above is a contingency of this Agreement unless otherwise agreed in writing. Buyer's contractual obligations to obtain and provide deposit, balance of down payment and closing costs are not contingencies of this Agreement.

14. Time Periods; Removal of Contingencies; Cancellation Rights: The following time periods may only be extended, altered, modified or changed by mutual written agreement. Any removal of contingencies or cancellation under this paragraph by either Buyer or Seller must be exercised in GOOD FAITH and in writing (C.A.R. Form CR or CC).

14F. Effect Of Cancellation On Deposits: If Buyer or Seller gives written notice of cancellation ….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 (Civil Code §1057.3).

Given you mention the cancellation is by "mutual agreement", it sounds like the cancellation should go smoothly; however, again, not all of the details regarding the cancellation are known by the responders to your question.

Best, Steve
0 votes Thank Flag Link Sun Nov 14, 2010
Cloud:

The answers you received below could be only partially correct. Many escrow companies are releasing earnest money deposits LESS a cancellation fee (ostensibly for services rendered by the escrow company) and any costs incurred during the open escrow (ordering of HOA documents, Natural Hazard Disclosure Reports, etc). If you read the escrow instructions that you signed, you will see that they have the right to do this.

You may need to get both your agent and the seller’s agent involved if the escrow company issues cancellation instructions that include a hold back for this cancellation fee. Most listing agents have a good working relationship with their escrow company and can get the cancellation fee waived. Also, any documents ordered for your escrow, will need to be returned to the escrow company for use with a future buyer. Because they will be able to recoup the costs from the new buyer, they should not charge you for these items. Have your agent proactively insure that escrow is not charging you these fees or you might get surprised by a $400-800 withholding from your funds when escrow issues the refund check.

Sorry to hear that this purchase did not work out for you. Good luck in your search for a replacement property and Dare to Dream.

Shel-lee Davis, QSC®
Certified Distressed Property Expert – CDPE®
Short Sale & Foreclosure Resource – SFR®
Certified HAFA Specialist – CHS®
SSG Pro®
Your Real Estate Consultant for Life
RE/MAX Palos Verdes Realty
http://shel-lee.listingbook.com
0 votes Thank Flag Link Sat Nov 13, 2010
The best answer of all is mine....yes!
0 votes Thank Flag Link Sat Nov 13, 2010
If the cancellation is per mutual agreement....nothing else matters! The time frames come into question when there is dispute in the cancellation. It seems as if Pam's answer is the best. The other answers are: TMI! Sorry if that offends anyone but the homebuyer is asking a very simple question and Realtors sometimes just give out Too Much Information that sometimes confuses the consumer.
0 votes Thank Flag Link Sat Nov 13, 2010
The answers you have been given are correct. To take the answer a step further, there is a CAR form to be used (Calif Association of Realtors) and it is called the CC-cancellation of contract. Besides canceling your contract, you want to also cancel the escrow. These are 2 different things to cancel.
Web Reference: http://DeborahLondon.com
0 votes Thank Flag Link Sat Nov 13, 2010
Hi Cloud,

Yes, you are correct - as long as your contingencies were not removed in writing, they will still be in effect, even if you are on the 18th day of a 17-day contingency period. California does not allow "passive removal" of contingencies, meaning they must be removed in writing. My colleagues Denny & Pam below are correct.

Good luck with your situation & hope you get your deposit back quickly.

John Barry
DRE #01856079
Coldwell Banker Residential Brokerage
Cell: 323-810-7976
Email: john.barry@coldwellbanker.com
Facebook: http://www.facebook.com/RealtorJB
Twitter: @RealtorJB
0 votes Thank Flag Link Sat Nov 13, 2010
to add to the question, cancellation was requested within 17days but 17th day is over now. is it still okay as long as contingencies were not removed in writing? please advise.
0 votes Thank Flag Link Sat Nov 13, 2010
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