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When deal falls through, who gets the earnest money?

Q. My husband and I accepted an offer May 5 with a buyer who chose to close on or before June 30. He obtained a commitment letter, but then the bank found out he is divorced and responsible for the mortgage on his old home. The bank said he'd have to be released from that existing mortgage. The Realtors were aware of this, as were the attorneys, but we were not informed. June 30 came, and we were told the buyer was "looking for other financial options" and he would "be able to close soon."

We requested that our attorney issue a "time is of the essence" clause for July 13 at 10 a.m. Needless to say, he was a no-show. I asked about when his earnest money deposit would be sent to us and was informed by our attorney that buyer and seller must agree to release the money.

It is clear on the contract that if buyer or seller do not perform according to the terms of the contract, the deposit should be released to the seller. The funds remain in escrow. Can you give us any information on what our attorney calls this "new law" regarding the release of earnest money?

A. Yes, the closing date in most sales contracts is simply a target, unless the words "time being of the essence" are included. If that date comes and goes, the contract is still in effect. Yes, either party can do as you did, later making time of the essence, which is pretty much a "show up or drop out" ultimatum. And yes, whoever is holding the buyer's good-faith deposit in escrow has no authority to release it without the parties' agreement or a court order.

It's interesting that your contract says the seller is entitled to the deposit even if it's the seller who fails to perform - not that that applies here. At any rate, your attorney will have advice about what to do next.

Q. I am half owner on a property in Florida, and I am eager to sell; however, the other owner will not agree and also will not pay half the property tax. Is there any way I could claim the property, seeing as I have been paying all the taxes for 50 years?

A. I don't think so, because either owner is responsible for the full tax bill anyhow. You do, though, have the right to go to court and force "partition" - an all-cash auction sale with division of the proceeds. (Different rules may apply, by the way, if the property is owned by a married couple.)

Partition might not yield as much as a sale on the open market. Sometimes a letter from your lawyer explaining this is enough to bring your partner's consent to a normal sale.

As for the property taxes you've been paying - a judge might rule on whether you would be entitled to a larger share of the proceeds from selling the property.

Q. My daughter is looking to buy a home. She had her offer on a house accepted and has a preapproved loan. Then came the home inspector, who found that the roof is covered with T-lock shingles, and insurance companies will no longer write a new policy for a house with a T-lock roof. The seller won't replace the roof. Is there any way to rescue this deal?

A. It's possible that some insurance companies just might still accept T-lock shingles. An independent insurance agent could contact a number of firms to inquire. And has anyone investigated whether the present insurance company would transfer the existing policy to a new owner?

Your daughter's lender won't go through with it if the property can't be insured. Then it's the seller's problem. He'd have to replace the roof in the end anyway or hold out for an all-cash buyer willing to take a risk until a new roof could be installed. That buyer would certainly expect a discounted price.

Q. I have two sons. One has a mortgage of $90,000, and the other has a student loan of $90,000. If I paid these bills off, would they have to pay a gift tax?

A. I don't quite see what that has to do with real estate, but at any rate:

Recipients don't pay gift taxes. As the giver, you must file a federal return if you give anyone more than $14,000 a year. No actual tax would be due, though. That $180,000 would be subtracted from what Uncle Sam lets you leave tax-free at your death - currently more than $5 million.

• Contact Edith Lank on www.askedith.com, or 240 Hemingway Drive, Rochester NY 14620.

© 2016, Creators Syndicate

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