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Rich VanValkenburg
11-09-2011, 09:45 AM
Should the deposit on a real estate offer be forfeit if the buyer backs out? Seems his divorce wasn't finalized and he didn't want the value of the house added into his possessions to be divided. I'm surprised that our broker didn't write that into the purchase agreement. This is in Michigan.

Paul Pless
11-09-2011, 09:49 AM
Deposit or 'binder'? Are the funds in escrow?

George Jung
11-09-2011, 09:56 AM
I'd say they're forfeit, but.... depends how it was written.

Mrleft8
11-09-2011, 09:57 AM
As far as I know the deposit is refundable unless it is expressly stipulated that it is non-refundable. The usual reasons for refunding a deposit are conditions of sale not being met (Such as approval of an independent inspector, or a closing date missed). Seems to me slightly draconian to expect him to forfeit his entire deposit, but I certainly would expect some sort of penalty, for essentially taking the house, and therefore a potential sale, off the market for a period of time.

Ron Carter
11-09-2011, 10:29 AM
Listed a house last fall. Potential buyer put up a deposit with the real estate agent. Deal fell through. We were told the deopsit was returned to the buyer. Talked to them several months later and they were told we had recieved it. Agency had since ceased doing business and both the agent and realtor not to be found. Also in Michigan. I'm told in MI failure to obtain financing means the buyer gets the deposit back.

B_B
11-09-2011, 11:00 AM
Should the deposit on a real estate offer be forfeit if the buyer backs out? Seems his divorce wasn't finalized and he didn't want the value of the house added into his possessions to be divided. I'm surprised that our broker didn't write that into the purchase agreement. This is in Michigan.
On a side note - here, AFAIK, divorce settlements are as of date of separation not date divorce is finalized. Seems kind of strange that a system would take into consideration assets at time of divorce finalization - there's lots of time for assets to get hidden or spent or accumulated.

B_B
11-09-2011, 11:02 AM
Listed a house last fall. Potential buyer put up a deposit with the real estate agent. Deal fell through. We were told the deopsit was returned to the buyer. Talked to them several months later and they were told we had recieved it. Agency had since ceased doing business and both the agent and realtor not to be found. Also in Michigan. I'm told in MI failure to obtain financing means the buyer gets the deposit back.
Isn't there a professional organization for realtors in Michigan? They may have a system in place to deal with this sort of thing.

Garret
11-09-2011, 11:28 AM
Isn't there a professional organization for realtors in Michigan? They may have a system in place to deal with this sort of thing.

If nothing else, there's the National Assc. of Realtors http://www.realtor.org/ If the agent was not a Realtor (c) - then they may be out of luck. Why would anyone use an agent who is not?

bobbys
11-09-2011, 11:43 AM
Our JOE is a Realtor but he is in the penalty box right now

Rich VanValkenburg
11-09-2011, 11:57 AM
Both agents are Realtors. Our agent said "In 32 years I've never seen a buyer forfeit their deposit". Lefty, you're along my way of thinking. The house was off the market at a prime time of year for about two months. What's done is done, but I'm a bit disgusted about it.

nw_noob
11-09-2011, 06:23 PM
The procedure probably varies from state to state, as state laws might be different. That said, the whole point of the earnest money being held is to ensure that the buyer is serious about the deal, and it should be forfeited if they back out, in theory. In practice, if the buyer wants to keep their money bad enough, they'll get an attorney to argue that the contract was somehow invalid and they should get to keep the money.

It's probably worth a visit to the title company or whoever holds the escrow accounts in Michigan to find out why the money was released. Also tell your Realtor that just because he's never seen it happen, it doesn't mean you're OK with him not trying to get you what's (probably) rightfully yours.

PhaseLockedLoop
11-09-2011, 07:12 PM
If you took your house off the market when the earnest money was tendered, you keep the money if the deal falls through. This isn't so much to penalize the non-buyer as to recompense you for the days off the market. Why else collect a deposit? Your realtor is lying, unless for 32 years he's been writing stupid sales agreements. I'm Michigan too, and i've kept earnest money when a deal fell through, though it took some shouting to get it.

nw_noob
11-09-2011, 07:28 PM
I'm Michigan too, and i've kept earnest money when a deal fell through, though it took some shouting to get it.

This, in a nutshell, is the problem.

You shouldn't have to shout to get what's yours. Unfortunately people who loose their earnest money shout the loudest so title companies, ever the people pleasers, sometimes give in.

I had a developer as a client once who screwed up his end of the deal, and had a large chunk of cash sitting in escrow. He wanted me to fight for his money. I informed him in no uncertain terms that the money was no longer his, and I wasn't about to attach my name to his douchbaggery in an attempt to get it back. He pitched the hissy fit himself and kept the deposit. It shouldn't have happened, but it did.

skipper68
11-09-2011, 10:02 PM
Spend $35.00, go get a refund from the court. They stole your money, by locking in the deposit. It is probably in their froze account, if I am reading this right. The financial world is upside down, but the deposit is yours, as the deal did not go through, not your fault. Call your county clerk, she/he will help you. P.S. Don't pay the broker. Might have been taken by the broker.

delecta
11-10-2011, 06:48 AM
I sold a house three years ago that the initial offer included a 5k deposit. The buyer requested a few improvements be made and I accepted the offer with the stipulation that another 5k be added to the deposit. So now the total was 10k, which was held by the broker in escrow.

The night before the closing the buyer got cold feet and attempted to back out of the deal, I said no. The buyer offered 5k of the 10k deposit to walk away hoping that I wasn't aware that I was entitled to the whole 10k.

I responded that I would kill the deal for the whole 10k. The deal went through when they decided 10k was too much to throw away.

A year after the closing they put the house on the market for 25k more then they paid, now two years later the house is still on the market and the asking price is now 35k less then they paid and still sits empty.

In retrospect, the 10k loss would have been the better deal but hindsight is always 20/20.

Sounds like you should consult an attorney.

Rich VanValkenburg
11-10-2011, 09:01 AM
In answer to Paul's question, it's in escrow set up by his broker. I checked the purchase agreement again and there is a default clause. My opinion now is that the brokers will probably split the deposit, tell the buyer he forfeits and telling us that he doesn't. I wouldn't be surprised.

Paul Pless
11-10-2011, 09:07 AM
Rich, Kat and I bought our house from an individual that was a licensed real estate agent and broker in the state of Michigan, and was acting as the listing agent. About half way through the process he started acting pretty unethically with regards to home inspections and allowing our lender and Kat and I to have access to the property to prepare bids from contractors to have the necessary estimates in hand to guarantee a loan. Our real estate agent prepared a letter to send to the State of Michigan Board of Realtors with a detailed list of the complaints. Before sending it to the board, she sent it to him certified. He completely reversed his behavior at that point, and became most amenable to our requests.:d

nw_noob
11-10-2011, 05:55 PM
In answer to Paul's question, it's in escrow set up by his broker. I checked the purchase agreement again and there is a default clause. My opinion now is that the brokers will probably split the deposit, tell the buyer he forfeits and telling us that he doesn't. I wouldn't be surprised.

That escrow should be with a third party. In my state the check gets handed to the sellers agent, and must be deposited with the title company within 1 business day. Get with your agent and find out where the money is. The scenario you're imagining is probably 5 or 10 kinds of illegal.