Expert: Diann Tonnesen - 2/19/2011

Question
I am in the process of purchasing a home. I made a $3000 deposit that is in escrow. The seller has refused to make any corrections noted by the inspector. There was also a termite inspection that revealed damage. The seller hired their handyman to make the termite repairs. When the original inspector inspected the damage again he could not verify the the repairs corrected the problem. If I cancel the contract based on these refusals by the seller, will I get my $3000 deposit back that is in escrow. Thanks.

Answer
Hi Stephen,

I am sorry you are having such troubles purchasing a home! Unfortunately no real estate agent can answer this question, not even the agent that originally wrote the contract. This is how the system works:

You write an offer to purchase property with several contingences so you can have the house checked out by professionals like an inspector, get a loan in place, order an appraisal to prove the value, etc. You usually have a "due diligence" period written into the contract so you can take care of these items.

Somewhere during your due diligence period something goes wrong (like the seller refusing to make repairs) and you cancel your contract. You sign a cancelation form and submit it to the escrow company, requesting that the earnest money be released to you as the buyer. All is well AS LONG AS THE SELLER AGREES TO SIGN THE CANCELATION FORM.

However, if the seller refuses to sign the cancelation form and disputes the release of funds for ANY reason (which could include aliens invading his body), you will have to take him to court to fight for your earnest money. The escrow company by law cannot release the earnest deposit funds without written permission from both buyer and seller or a court order, no matter what is written in the contract or if they clearly think one party is right and the other is wrong.

Most of the time these matters go to small claims court and a judge makes the ruling based on the contract and the sworn statements of the seller and buyer. The amounts are usually small enough that no attorneys have been involved. Again, whether or not you have to go this extreme doesn't necessarily have any relation to right or wrong - it's about the seller and the buyer signing off.

That being said, most of the time events do not get that far. Usually things can be resolved on paper and a mutually agreed upon cancelation can be submitted to the escrow company. I cannot comment on your specific transaction since I don't know what is in your contract. What does your real estate agent say about canceling?