Buying or Selling a Home/Earnest Money Dispute


We recently received a Release of Earnest Money (ROEM) which also notified us our Buyer had backed out of our sales contract. The reason stated was "Buyers Disapprove of Inspection Findings". In this case, a significant amount ($5K)of dry rot was discovered when the buyer switched mid stream from an FHA to VA loan which required Inspection work to be completed prior to closing. The buyers had already signed a contingency release. We have been told we need to go to Small Claims Court to keep the Earnest Money. I saw in an earlier answer that we can't sell our property until the Earnest Money dispute is settled? Is this true in California? I'm also interested if we can ask for other damages in small claims court such as extra house payments and expenses due to cancellation of this contract.

It would seem as though you don't have much of a leg to stand on, John. As long as there was no time limitation on the "Buyers' Disapproval of Inspection Findings," or the buyer was within his time limit on such a clause, there is not much you can do. You would have had to have inserted a shorter time limitation at the time of your response to the Buyer's acceptance and/or counteroffer.

It is true that a Small Claims Court would not loosen your claim on any of the Buyer's earnest money. However, you might indeed have a valid claim on other expenses. It appears as if the agent for the Buyer was able to tighten up the original purchase agreement in favor of his/her client more than what your agent was able to do for you.

I would also say that you should have had a pest control inspector go over your entire house prior to you having signed a listing to sell the house. Your agent should have made this recommendation.

At this point, it is recommended that you consult with a REAL ESTATE ATTORNEY, not just any attorney, to see where you stand. He/she might be able to spot a Buyer's weak point that might help your side. To find such an attorney, you might want to consult with the Board of Realtors' attorney and ask him for the name of a REAL ESTATE ATTORNEY that might be able to help you. I do wish you well.

Dick Dennis, California Broker

Buying or Selling a Home

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Dick Dennis


With more than 41 years as a real estate broker, I can solve most any problem presented. If I can`t, I do my research. Problems with mortgages, trust deeds, foreclosures, odd ways of conveying titles. Most any good Realtor can answer questions satisfactorily, but I answer questions that most cannot. Also, ask about my hard-copy newsletter, The Landed Gentry. It can also be sent to you via PDF.


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