Is litigation the only answer when a seller refuses to return deposit?
Q. My husband and I put down earnest money a number of weeks ago on a house we liked. We did the inspection and the inspector found a number of things wrong with the house. We went back and forth with the seller trying to come up with a resolution but the seller was only offering a few hundred dollars credit and our cost to correct the problems would have been much more than the seller was offering.
Our attorney finally canceled the contract due to the condition of the property being unacceptable to us. We requested the earnest money being held by the listing agent be returned to us.
The listing agent has now told our agent that the seller will not agree to release the deposit. She stated that until the buyer and seller reach an agreement as to how the funds should be distributed, or there is a court order as to how the funds should be disbursed, they (the listing broker) cannot release the funds. Our attorney has been in contact with the seller’s attorney, however, seller’s attorney has repeated what the listing agent said, that the seller will not agree to release the funds, though they have not told us exactly why.
Our attorney has told us he does not handle court disputes and that we need to find a litigation attorney. We don’t feel it is fair that we must spend money on an attorney to get back our deposit. Any other options?
A. Let’s start by making two presumptions. One, that you were using the Multi-Board Residential Real Estate Contract and two, that you/your attorney timely gave notice to seller/seller’s attorney of your objections to the condition of the property. Presuming the above and no other facts exist impacting your rights under the inspection provision of the contract, it would appear the seller is improperly holding up the release of your deposit. I should also add that the listing agent is acting as virtually any agent holding earnest money would act. When the issue of who is entitled to earnest money funds is in dispute, no agent will release these funds absent an agreement by the parties or a court order.
You did not state the amount of the deposit. If the deposit is $10,000 or less, one option would be filing a small claims complaint in the county where either the seller lives or the property is located. Most counties have websites that assist plaintiffs in filing these types of complaints. Often, no attorneys are involved. The seller will need to be served with the complaint, so you will need to know where the seller can be located for service. The filing and sheriff’s fees should be under $500 and you can recover those costs assuming you prevail.
Given the initial costs you will incur and time you will be spending on this, I might suggest offering the seller some of the earnest money deposit to settle this. At this point, the seller is obviously unhappy about something, whether legitimately or not, and there is no motivation for him/her to agree to return the deposit, other than it’s the right thing to do. It would appear he/she needs a little additional motivation and, say, $500 might be “additional” enough to motivate him/her.
One final note … in the event you cannot work something out with the seller and you would prefer to hire an attorney rather that filing the small claims complaint, be aware of the provision in your contract that provides that in the event a lawsuit is filed to enforce a party’s rights under the contract, the prevailing party in the lawsuit is entitled to collect reasonable attorneys fees from the non-prevailing party. This may be another “motivator” when you are discussing settlement with your seller.
• Send your questions to attorney Tom Resnick, 910 E. Oak St., Lake in the Hills, IL 60156, by email to tom@thomasresnicklaw.com or call (847) 359-8983.