Expert: William Cady Date: 7/14/2007 Subject: Earnest Money
Question QUESTION: Sir
You attempted to answer a question for me, but said you couldn't give me advice because I was using an attorney. This attorney is a friend of the family and is not charging a fee - I am not formally a client. He has said that he does not know what to tell me.
This was in regard to my ownership of the earnest money check that had been delivered to a title co. The contract was cancelled 7/9 and the option period ended today, 7/13. The title co informed me that I could pick up the package that had not yet been processed - then called me back 2 days later saying they should not have done that.
My question was what am I to do - do I have to return the earnest money check even though the contract has already been cancelled? Does the release of earnest money form release all parties from the transaction or did the cancellation of contract do so? I know they already have the option fee, and I don't get that back. I don't want to be doing anything illegal or give them grounds to sue me for specific performance. I realize what a normal transaction is - this one was not normal from the beginning! I won't bore you with why.
ANSWER: The termination of contract gave notice from you to the seller that you were exercising your right to terminate during the option period. That is what cancels the contract. The Earnest Money form is what gets you your money back. According to the verbage when you and the seller sign it you are both agreeing that you are done.
If that has happened it should be over, unless the seller decides to give you a hard time about getting your earnest money back.
Are you telling me that you currently have the earnest money check that you wrote out initially and it never got deposited?
---------- FOLLOW-UP ----------
QUESTION: Mr. Cady:
I answered your last question about whether or not I had the original earnest money check - which I do.
I forgot to mention that I am concerned about the wording in the TREC contract (One to Four Family Residential Contract - Resale) on first page, #5 Earnest Money - which is my case, designated that I had given $2,000 earnest money to be deposited with the Title co, etc. No additional monies were to be deposited. Then the last sentence reads "If Buyer fails to deposit the earnest money as required by this contract, Buyer will be in default". That's the part I'm worried about.
Thanks,
Theresa
Answer Personally I would never have been party to a transaction like this one. Whether I was the buyers or the sellers agent I would have made sure that the money had been delivered to the title company along with a fully executed contract. Because it was not this is now subject to a variety of opinions. I have spent time on the phone calling people trying to get you an answer this morning, which is something your agent should have done. Here's the variety of answers that I've received:
1)That you did not really have a contract in the first place because the earnest money was not delivered along with the contract to the title company
2)That you are in default according to to paragraph 15 if the seller wishes to exercise that option
So, I was unable to come up with a solid answer for you. This very well may come down to a legal opinion. Have you tried asking your agent to find out whether these people are willing to let you walk away and be done with this? Or are they demanding the earnest money?
