Expert: Ray Beggs - 5/9/2006

Question
I live in MA and looked at a home that we liked. We signed an offer to purchase - gave a $500.00 retainer - had the home inspected (it was fine) but then noticed that the dormered bedrooms upstairs would not accomodate our bureaus and some of the furniture would not fit. We backed out. The RE Co. cashed our check and is now trying to keep the deposit saying: That we had no good reason to back out since we were approved by the bank and the house passed inspection. We did not sign the P&S. Can we legally get our money back?

Answer
Hi Ruth,

Thanks for your question. The answer is, probably not. The only way that you can get your deposit money back is if the escrow is canceled for a reason that is addressed in the contract. (ie. didn't get the loan, inspection items that didn't pass, home didn't appraise, etc.) Now, I'm in California and there could be some things different in MA real estate law, but I think that the escrow company is probably correct in keeping the deposit.

The reason that the sellers get to keep the deposit is because the escrow was canceled even though all of the contract contingencies had been met. Loan, physical inspection, appraisal, etc. Finding out that something doesn't fit, isn't covered in the contract, unless it is specifically written into the offer by both parties. You have to look at it from the sellers point of view. They accepted your offer, took their home off of the market and did everything that they had to do according to the contract. They also owed a mortgage payment, taxes, etc that they paid while you had them in escrow.  Maybe they lost potential buyers during the time that you were in escrow with them. Maybe prices slid back a little while they were in escrow and they are out that money. Maybe they fixed repair items that you asked for. There are a whole host of reasons that they are entitled to the deposit money. Actually, in California, the average deposit is much higher (closer to $5,000) and the sellers would be entitled to that money just the same. What if 3/4 of the way through the escrow it was the BUYERS who came to you and said, we're backing out of the contract because someone has offered us more money. You would then be due some sort of monies from the buyer because you had been damaged. (Loan fees, apprasial fees, inspection fees)

I hate to be the bad guy in this, but I feel the sellers are justified in keeping the $500 in this case for the reason that you stated that you backed out.

Take care,

Ray