Good Faith Deposit Refund

Asked by Nicole Provost, Baltimore, MD Tue May 7, 2013

We recenltly put a contract in on a house in Balitmore. When we had the inspection, we took the results and asked the sellers to fix certain items. The sellers refused. Because of this, we withdrew ourselves from the contract. The contract included a provision that if we wanted to withdraw because of the inspection we could and the deposit would be refunded. It has been several weeks and the seller has released us from the contract but has not released our deposit which is in escrow with our agent. How can we get our deposit back? We have asked our agent several times and their response is, :"they have left the agent several messages".

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Mark Lee, Agent, Timonium, MD
Tue May 7, 2013
You and the seller should have signed the deposit disbursement agreement that is usually part of the release agreement. If the seller has not signed the deposit disbursement agreement but has signed the release agreement, then that makes your situation a bit more tricky, in my opinion.

I represented buyers in a very similar transaction and had a seller and listing agent who refused to release my buyers' earnest money deposit. I contacted the Maryland Association of Realtor's Legal Hotline and posed the issue to them. Here is the partial response I received from MAR (irrelevant parts deleted for clarity):

"As for the EMD, pursuant to Section 17-505 of the Maryland Real Estate Brokers Act (the Brokers Act, the Act), the broker must maintain trust money in an authorized account until: (a) the real estate transaction for which the trust money was entrusted is consummated; (b) the broker receives proper written instructions from the owner and beneficial owner directing withdrawal or other disposition of the trust money; (c) the broker files an interpleader motion with the court, which he may do at his discretion, or the court orders a different disposition; or (d) the parties fail to complete the transaction and the broker opts to disburse the deposit in accordance with Section 17-505(b) of the Act.

Section 17-505(b) is an option if the parties are unwilling or unable to execute a release of deposit agreement. This procedure, which is to be undertaken in the absence of a signed release, authorizes the broker to notify the owner and the beneficial owner that the broker intends to distribute the trust money in the manner which, in his good faith opinion, is appropriate under the terms of the contract. The letter must be in writing and state to whom the trust money will be paid. It must also advise both parties that they may submit a protest within thirty days from the date the notice was delivered or mailed by the broker and that the money will be distributed as proposed by the broker if no protest is made. The letter must be either hand delivered or sent by certified mail, return receipt requested and sent by regular mail. It is also required that the agreement entrusting a broker with trust money contain a statement that the broker may distribute the trust money in accordance with the provisions of this law in the event that the relevant real estate transaction is not completed. If no protest is received, the broker may distribute the trust money as proposed in the letter.

Also, a broker may initiate an action for interpleader against two or more adverse claimants who claim or may claim to be entitled to property. Interpleader allows a plaintiff to initiate a lawsuit in order to compel two or more other parties to litigate a dispute. An interpleader action originates when the plaintiff holds property on behalf of another, but doesn't know to whom the property should be transferred. In the real estate example, the broker would file the action as the plaintiff and the buyer and seller are the defendants. The defendants usually have competing claims to the deposit in the hands of the broker, who wishes to be relieved of being caught in the middle. When the original plaintiff (broker) is discharged from the action, one of the two original defendants becomes the plaintiff and the other remains the defendant. The broker will place the property in the custody of the court pending the outcome of the action."

I am not an attorney and am only providing information to you. I would press your agent for further action on the part of the seller and listing agent. If that does not prove to be fruitful, have your buyer's agent's broker contact the listing agent's broker. You may have to contact an attorney.

Good luck!
1 vote
Michael Fara…, Agent, Baltimore, MD
Tue May 7, 2013
It's a little unclear. You say your agent was holding the deposit, so his (your) broker has to cut that check back to you, if the seller has returned the signed release. Check with your agent again and call his broker if you do not get a quick response.
If the seller's broker was holding the deposit, your agent or his broker can call the seller's broker to speed it along.
1 vote
Dale Hunter, Agent, Dundalk, MD
Wed May 8, 2013
I would tell you to call your agents broker/Manager directly. If that does not get you anywhere and you do have a signed release agreement signed by all parties, I would call the seek legal advise from an attorney.
0 votes
Asha Goel, Agent, Lutherville, MD
Tue May 7, 2013
Hi Nicole,

If they have released you from contract than they cannot keep your deposit. You need to have a talk with your agent and manager for this issue. If seller refuses to sign release you have right to put a lien on their home which will stop them from selling their home to any one but you really don't want to do that. Sellers might not be getting proper advise either. Since your contract already had the provision, Seller cannot keep your Good Faith Deposit for sure.

Thanks and good luck,

0 votes
stephen webb…, Agent, Kirkland, WA
Tue May 7, 2013
Hi Nicole
In most states the last thing the seller wants is a cloud on their title. Post a quesiton on trulia about filling and maybe an attorney or title rep from your area will respond with information. If any titile work has been done ask the title company rep. If escrow has been opened ask the escrow officer. Filling in small claims court will also get everyones attention.

Call the brokerage that the listing agent works for and ask for the managing broker.

Best of Luck, Stephen Webber, Your Road Home for First Time Home Buyers
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0 votes
Akil Walker, Agent, Upper Marlboro, MD
Tue May 7, 2013
Hi Nicole,

At a minimum see if your broker can reach out the listing agent's broker to discuss the matter. Next step might be mediation.

Good luck
0 votes
Scott Karg, , Baltimore, MD
Tue May 7, 2013
Go here, they will make sure it get's done.…
0 votes
Jeffry Golds…, Agent, Baltimore, MD
Tue May 7, 2013
Your "battle plan", in order:
1. Contact your agent. Ask for the office manager or broker's name and phone number. Thank them. Hang up.
2. Call that individual, and relay to them what's happened thus far, as above. Let them know that you'd like their prompt attention with this matter. Thank them for their time.
3. On page 10 of 10 of your contract of sale is the other agent's office phone number. Call the office, ask for the name and phone number of the office manager or broker. Ask to speak to that individual. Relay to that individual that you have an executed (presuming it is, signed by yourselves, and by the seller) release of contract that stipulates that the earnest money deposit (assuming that this is what the release says) is to be released back to you, and that it's been an unacceptably long wait to receive that check. You may be told by their broker that the check is coming from out of state, etc., and that it might take some time. Let them know that their attention in this matter is appreciated, and that you'd like to be contacted when there is confirmation that the check has been sent, either from their office, or from their corporate office, which they should comply with.

That, ordinarily, is all you'll need to do. If that doesn't resolve the problem satisfactorily, additional action may be necessary, but in most cases, that's all you'll need to do. Do make sure your release specifies that the deposit is to be released back to you. Do make sure that the release say how and where the money is to come back to you. If there is no address listed, when the check comes back from the listing broker, they might not know where to send it, in which case it can end up on an administrative assistant's desk.

Should all this fail, there are a few other simple steps you can take. If it comes to it, contact me, I'm happy to offer assistance.
0 votes
Pat & Steve…, Agent, Westlake, OH
Tue May 7, 2013
We suggest that you ask your agent to contact the seller's agent's broker for the refund. If that does not work, you should contact your agent's broker to contact the other agent's broker for the refund of your funds in escrow. If that does not work consult a local attorney who handles residential real estate matters.
0 votes
Laura Feghali, Agent, Stamford, CT
Tue May 7, 2013
Hello Nicole,
If your deposit is in an escrow account with your agent's company then you need to be contacting your agent to have it released back to you since you have been released from the contract. If your agent is non-responsive then contact his Broker (office manager) to have it returned to you.

Best wishes!

Laura Feghali
Prudential Connecticut Realty
0 votes
Tim Moore, Agent, Kitty Hawk, NC
Tue May 7, 2013
The easiest way is to get the seller to sign a document refunding the earnest. If they signed a release they should have signed that too. Sellers often try punish a buyer that backs out by stonewalling the refund, it sounds like this is what is happening. Your options include contacting a lawyer to write a demand to refund the money or you could make an appointment to go see the sellers agents boss - the office broker. Get them involved.
0 votes
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