Home Selling in Albuquerque>Question Details

Ms. Troubled, Home Seller in New Mexico

I am selling my home. We were supposed to close at the end of this month. However, the person who was

Asked by Ms. Troubled, New Mexico Wed May 14, 2008

going to purchase the house doesn't have enough money for the closing and downpayment. Do I get the earnest money or do they get the earnest money?

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11
As always, there is the "legal" answer, and then there is the practical answer. Without the written consent of both parties, the only way an escrow officer is going to disburse those funds to either party is by court order. So, who's going to get the court order first? Well, first retain a lawyer, which will cost about $2,500 minimum, which will be deposited into the attorney's trust account to start the case. Plan on about 10 hours of work minimum for anywhere from $200-300/hour. If the other party also hires an attorney, prepare for a lengthy battle unless the two parties can settle their differences about the disbursement of the earnest monies in escrow. If it was a significant sum of money, then perhaps this course of action is desirable, but I don't think that anyone could predict beforehand which way either an arbitrator, judge, or worst case, a jury, would sway without a lot more facts. If the amount of earnest money is modest, the Seller might just consider making a deal with the Buyer to release most if not all of the money back to the Buyer for an agreement to terminate the Purchase Agreement and close the escrow account. Perhaps the Seller should negotiate actual expenses incurred be withheld, which may be seen as reasonable. This will avoid attorney's fees and more quickly resolve this matter. The point is to find a qualified and willing buyer for your property as soon as possible. Just a disclaimer here: I'm not an attorney, only a real estate broker, and you should always seeks appropriate professional help where necessary...Good luck!
1 vote Thank Flag Link Wed May 14, 2008
Since you are identified as a home seller in NM, if you used a local realtor, your contract is probably on a standard Realtor Association of New Mexico form, which specifies by which time they had to inform you of their ability or inability to secure financing (section 7 on pg 2 of 10 on the 2008 RANM Purchase Agreement). If they are within these deadlines, they are typically entitled to the earnest money, but if they have passed any of those deadlines, they are in default and you would therefore be entitled to the earnest money. Issues like this highlight the importance of negotiating the finer details of the contract and when a real estate professional can be of true value. Best of luck to you!
1 vote Thank Flag Link Wed May 14, 2008
A purchase is always contingent on the ability of the buyer to get a loan. So, if the lender sends a letter saying the buyer can not complete the conditions of the loan, you have to return the earnest money.
1 vote Thank Flag Link Wed May 14, 2008
there are options for first time buyers why don't you ask them what program they use to qualified member DPA (down payment assistence still good but end at 10/01/2008offer to your buyers my number or web site address 505-304-2907
0 votes Thank Flag Link Thu Sep 4, 2008
The disbursement of the Earnest Money is determined in the termination of the contract if you do not agree to refund the Earnest Money back to the Buyer. You will then need to file an Interpleader with the Title Company holding the Earnest Money. The Title Company will turn the funds over to the appropriate court to settle disbursement.

Unlike what D. says you cannot take the buyer to small claims court according to the terms of your contract if you used the legal New Mexico contract RANM form 2104 and would need to consult an attorney. If it is decided you are entitled to the Earnest Money back you can recover your court costs and attorney fees. But this is a long and lengthy process. The Earnest Money can be held by the Title Company for Years.

David is absolutely correct. The buyer must have notified you in writing within 2 days of this occurance or they may be in default of the contract.
0 votes Thank Flag Link Thu Sep 4, 2008
If within the purchasing contract, the buyer/agent wrote "Sale contingent upon seller obtaining financing" you do not get the earnest money. If some form of the above verbiage was not included, the earnest money is yours. Forget a lawyer, if it was not written in, take him to small claims court, represent yourself, $40.00 small claims court fee, case closed. Yes he will have to pay your filing fee, make sure you include it in the total dollar amount you are seeking. The amount you are seeking must be under the state dollar limit for small claims. If larger than the state minimum, you will need to retain a lawyer (unfortunately), and file a civil case.
0 votes Thank Flag Link Fri Aug 29, 2008
Most of my colleagues have given you a great deal of information on the assumption that both parties were represented by a brokerage. If, in fact, you were a OBO seller, then i hope you have retained the earnest money in your control. If not, then your representative dropped the ball & should be reprimanded. David in Albuquerque makes a good point ~ this is one of the many ways we earn our professional fees! Deadlines are in contracts for a good reason ~ i sincerely hope you are able to recover your damages. Vivian Katz, CIPS
0 votes Thank Flag Link Thu May 15, 2008
All the subtleties in the answers below are accurate and right on the money. There are numerous contractual deadlines that should have been met to insure on an ongoing basis that the Buyer was and continued to be in a position to buy the property.

It appears that your agent did not monitor those deadlines so I would look to them first for an explanation of those oversights.

Both parties do have to agree on distribution of the Earnest Money. Hopefully the buyer will be of good faith and recognize their part in this failure of the transaction. But people get "weird" when it comes to "THEIR" money!

It sounds as though you have not filed the appropriate paperwork yet. Insist that your agent provide that documentation for your signature immediately. Pray for a rational buyer and if they prove not to be, realize that a lot of that money will indeed be expended in legal fees.

After this is all over, I would have a stern discussion with your agent's broker asking why your agent did not insist that the ongoing accountability during escrow be met by the buyer.

BARBARA
0 votes Thank Flag Link Thu May 15, 2008
Ms. Troubled
I have some concerns:
First, has the buyer removed all the contingencies, particularly the loan contingency? If he has NOT removed that contingency, then (check with your Realtor or an attorney on this), he can cancel with no penalry (normally).
Second, if he has removed the loan contingency, he has probably removed all the rest. It is now a question of "failure to perform". Without the downpayment the lender will not fund the loan.

Third, normally the earnet money deposit is use dto open escrow, then an additional downpayment is made within a certain time frame as an "additional deposit subject to liquidated damages". This is something that your Realtor should have been watching.

Was there are question "Gee, I wonder if tthe buyer has the deposit?" or "The buyer did not provide proof of funds for the deposit, heads up!" A sharp Realtor keeps track of things like this to avoid nasty surprises. In other words, it should be be evident to competent people until the last minute that there is a problem.

Consult an attorney for clarification.
0 votes Thank Flag Link Wed May 14, 2008
Keith Sorem, Real Estate Pro in Glendale, CA
MVP'08
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In most cases both the buyer and the seller need to agree to earnest money disbursement, so if there is a dispute the earnest could just sit in escrow. The Purchase Agreement (contract) that you have with the buyer should have addressed this contingency and how it will be handled. Like Bruce said, in most cases a purchase is contingent on financing, and unless it was specified otherwise it the contract, you would refund the earnest. We always recommend that our sellers get a “pre-approved” (not just “pre-qualified”) letter from the lender of the buyer (preferably someone local and reputable); especially the way lenders are today. The lenders are changing rules all the time lately and someone could be approved one day and not the next. I hope it works out for you.
0 votes Thank Flag Link Wed May 14, 2008
In the two states where I have been a real estate agent, the earnest money is yours. Since the buyer is in default of the sales agreement, you are entitled to keep the Earnest Money. I would plan on expecting the buyer to request the money back. But, as your agent will tell you, the decision to release the money is up to you.
0 votes Thank Flag Link Wed May 14, 2008
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