Can a real estate company keep all earnest money in the case of buyer breach?

Asked by Jackie0614, Chicago, IL Tue Apr 24, 2012

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re.investor, Home Buyer, The Villages, FL
Thu Feb 11, 2016
Depends on the contract. Coldwell Banker contract says they get the money first for expenses and commission and if anything left, to the seller. This is grossly unfair. No other business rewards the salesman for not completing a sale regardless of fault. The buyer should get the money back if he has a good reason (death, divorce, loss of job, etc) but why a salesman getting commission for not selling the house or product? The seller's house has been kept off the market, the car dealer has lost potential sales while a car is considered 'sold' but a salesman who didn't complete the sale, no way..
0 votes
James Vandeck, Agent, Pittsburgh, PA
Sun Apr 29, 2012
A RE Company can sometime keep one half or some other percentage if it's described in the contract for sale. The condition of the actual breach, however, can only be passed down by an arbitrator or a judge who will then control the issue of the earnest monehy...
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Terry Perdue, Agent, Chicago, IL
Sun Apr 29, 2012
The real estate company does not ever keep money unless there is some written agreement as to who will receive the earnest money should there be a default or breach of the contract. If the buyer and seller do not agree of how the earnest money should be released it should eventually end up in the coffers of the state at which time the buyer will make a claim. Or, a party can initiate a legal proceeding as to disbursement of the earnest money.
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James Vandeck, Agent, Pittsburgh, PA
Wed Apr 25, 2012
It should specify in either the sales agreement or the listing agreement...Be sure to read the addendums...There should be a dispute clause. In Pa, the Broker that holds the hand money cannot adjudicate any claims. That's for the lawyers or arbiatrator to usually decide.
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Jackie0614, Home Seller, Chicago, IL
Wed Apr 25, 2012
I guess it says in the contract they can keep it. Funny how they can cross out the amount of earnest money and all kinds of other things in the interest of the broker, but not the seller. Its a racket. I am RN and that would be like me handing someones lab results to them and saying well I gave them the results. They are not educated in that way to read them. It is my responsibility to explain it all to the patient. And not once did the broker go over the contract and what it really meant. UNTIL after all this happened then they are more than glad to go over the contract. They are running from deal to deal and I understand that, but in all ethical sense they should split the money for what happened here.
0 votes
Jackie, I would probably use this situation negotiate either new/better terms with your broker or consider another broker that you you feel more comfortable with. Good luck and I wish you all the best in your transaction, transfer and move.
Flag Wed Apr 25, 2012
Matt Laricy, Agent, Chicago, IL
Wed Apr 25, 2012
It depends. What is in the contract?
0 votes
Joanne Berna…, Agent, Northfield, NJ
Wed Apr 25, 2012
You need to go back and re-read your listing agreement. If you haven't already done so contact a real estate attorney and ask him to advise you. If tho is a sizable depot you are losing, it will be well worth the cost!
Joanne Bernardini
Sales Associate
Certified Short Sale Agent
Keller Williams Realty
One Atlantic Ave.
Ocean City, NJ 08226
ofc.609-399-5454
cell 609-200-1321
http://www.trulia.com/profile/JoanneBernardini/
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Bill J Delig…, Agent, Naperville, IL
Wed Apr 25, 2012
Look at the nitty gritty details of the contract. If there is a legitimate breach of contract the Listing Realty Company may have cause to keep the EM. Your attorney though should be a advocating for the release of EM.
0 votes
my attorney is closely intertwined with the real estate company. he told me he did his job getting me to closing and then getting the earnest money and if the real estate company has a right to keep it so be it
Flag Wed Apr 25, 2012
my attorney dosent want to get involved. He told me he brought me to closing and thats all his obligation is.
Flag Wed Apr 25, 2012
Irina Karan, Agent, Aventura, FL
Wed Apr 25, 2012
Hello Jackie,

In FL, the amount of escrow money retained by the seller is usually defined in the listing agreement, and the balance is split equally between the brokerages involved. However, all is negotiable, and both buyer and seller has to agree to the split and release brokers of liability. If they disagree, our real estate commission decides the case - informing the brokers what to do. If the buyer or seller are not happy about commission's decision, the case will be decided through mediation.

Based on what other agents wrote here, check out both the listing agreement (if possible) and the contract. If needed further clarification, go see an attorney - for some, the 1st consult is free. I'd definitely talk to your agent and his broker - many issues are resolved by negotiating vs. courts. There are mediation companies, heart to heart talks...

Hope this helps,

Irina Karan
Beachfront Realty, Inc.
IrinaKaran@gmail.com
0 votes
Alan May, Agent, Evanston, IL
Wed Apr 25, 2012
If the buyer breaches the contract, they definitely risk their earnest money, and possibly open yourself up to a lawsuit for specific performance... (meaning, forcing you to buy!).

But the real estate company does not get to keep the money. Depending on the breach, and the damages, the buyer and seller have to agree on what portion is going to be "left behind"... the real estate company is not authorized to release a dollar, unless both sides agree.

Talk to your attorney about your potential loss, if the buyer should breach the contract.
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Diana Willia…, Agent, Chicago, IL
Tue Apr 24, 2012
Yes the Real Estate company does have the right to exercise this right especially if it wasn't negotiated in the contract before hand , also if the buyer did not have just cause to breach the contract .
0 votes
Tom Kelley, Agent, Chicago, IL
Tue Apr 24, 2012
First, I am not an attorney and you might want to check with an attorney. Second, I would recomend that you carefully read the Listing Agreement that you signed with the brokerage. Typically, they state something like the Listing Broker is due the commission when they procure a ready, willing and able buyer. If the property was under contract and the potential buyer walks and the earnest money is forfited - the listing brokerage would be owed the amount of the commission due to them per the listing agreement and then the seller would receive any remaining funds. Again, if you feel the situation was not correct, you should probably consult an attorney or at the very least - meet with the brokerage and ask for a copmplete explanation and accounting.
Web Reference:  http://tomkelleychicago.com
0 votes
Philip Sencer, Agent, Chicago, IL
Tue Apr 24, 2012
Nope. They cannot keep any of it. The buyer and seller must agree on who gets any money if it all does not go back to the buyer. Check with your attorney as this is a legal issue. Do not listen to what your agent says.
0 votes
Jackie, I am assuming that you are in Chicago and that you had a Chicago area broker list your home. If this is the case, most brokers in the Chicago area use the standardized "Chicago Association of Realtors Exclusive Listing Agreement rev. 5/2009". If this is the form that you signed, you might read on page 4, paragraph L -- in large, bold and capitalized letters it states: "IF THE BUYER DEFAULTS AND SELLER DECLARES A FORFEITURE OF THE EARNEST MONEY, THE EARNEST MONEY SHALL BE APPLIED FIRST TO PAYMENT OF BROKER'S COMMISSION AND ANY EXPENSES INCURRED, AND THE BALANCE SHALL BE PAID TO SELLER..." I am not an attorney, but that language is pretty clear. Now some brokerages will use their own agreements or older/different versions of the same agreement -- but if you read those document, I am sure that you will find similar language. As I stated in my comment yesterday, you might want to contact that brokerage and ask them to explain and also request a full accounting.
Flag Wed Apr 25, 2012
The termination letter from the buyer stated the money should go to me. keller williams called me today and said they would keep selling my house or they would be keeping the money to cover expenses
Flag Tue Apr 24, 2012
Dirk Gould, Agent, Chicago, IL
Tue Apr 24, 2012
The real estate company can't keep it for itself; but have your attorney review the contract with you to see what the instructions are in case of a buyer breach. It really depends on how far along in the process your are. Feel free to contact me if you want to discuss it with an attorney, but you should already have one representing you
0 votes
May I please have your phone number to contact you?
Flag Tue Apr 24, 2012
The attorney sucks!! He was recommended by the broker. It was two days before closing. And I took a job in another city 2 1.2 hours away and quit my job here. The breached for "personal reasons". And the broker said they were keeping it for commissions/expenses due
Flag Tue Apr 24, 2012
Suzanne Hami…, Agent, Orland Park, IL
Tue Apr 24, 2012
If the real estate company is holding the earnest in escrow, they need to abide by the rules of the contract. If there are contingencies, then they buyer may be entitled to full refund of escrow. If not, the company has to do what the contract says - return to buyer or seller. If the listing agreement with the seller allows them to keep some of it, then they can abide by that.
0 votes
The buyer breached and sent me a termination letter stating their forfeiture of the earnest money. But Keller Williams called me today and told me they were keeping the money to cover their expenses. That it is in the contract. I quit my job and was moving away and the buyer backed out 2 days before closing.
Flag Tue Apr 24, 2012
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