Cold Feet: Seller Request Release of Earnest Money
August 18, 2017 7:28 PM   Subscribe

I'm in the process of buying a duplex that needs a lot of work. Things have gone well so far but the sellers have presented me with an unexpected bump in the road. The seller has requested that I release my earnest money. The reason they have conveyed is they are concerned I will get cold feet in the next month as we wait for the sewer and electrical work to be completed. Contractors are booked out far in advance in my city, making it difficult to get the work done in a timely manner. This has pushed our initial closing date from the 8/23 to at least 9/28. While I understand their concern that I will back out before then, I have my own concerns with releasing such a large sum of money or even a portion of it. I'm curious if anyone has had an experience similar to this as either a buyer, seller or a real estate agent.
posted by ponderosa to Work & Money (11 answers total) 1 user marked this as a favorite
 
Can you put it in escrow?
posted by chesty_a_arthur at 7:31 PM on August 18, 2017 [3 favorites]


What the sellers are asking for make no sense.

The terms of what happens to earnest money deposits in escrows should be governed by your contract (according to your state real estate transaction laws) already - the entire point of putting the earnest money in escrow is to account for situations like these where the buyer gets cold feet and backs out, and the seller is then at least compensated for the lost time for dealing with a flaky buyer.

Chances are, there's a provision in your contract that governs how much time you'd have to back out without forfeiting the earnest money, and if you're barreling past that time period anyway it's possible the buyers are already entitled to the money (note that's not a reason to release it before the transaction is complete.)

Asking that you release it early in case you get cold feet is nonsensical, and strikes me as making it harder for you to back out of the contract if other issues come up during the process of renovating the duplex that may allow you to get your earnest money back in whole.

I would not release the money without consulting a real estate attorney (not your agent), so you can thoroughly understand 1) what you risk if you don't release the money (imo, nothing), 2) what you stand to lose if you do release the money, and 3) what circumstances, as part of your contract, would allow you to protect your entire deposit.
posted by Karaage at 8:08 PM on August 18, 2017 [24 favorites]


If somebody you are paying conveyed this to you as a reasonable request you should fire them.
posted by Mr. Yuck at 9:41 PM on August 18, 2017 [12 favorites]


Who is paying for the work on the duplex? If it is before closing, it should be them. It sounds like they are trying to come up with a way to make it you or to use your cash now so they do not have to front it until closing. They don't want to put all the work in in case you get cold feet? That is exactly what the earnest money is for. At the point you back out, then they can keep it. Before that, you are paying for repairs on someone else's property.

Nancy Reagan them. Just say no.
posted by AugustWest at 10:27 PM on August 18, 2017 [8 favorites]


No. Doing so would put all the risk of the work not being finished by the end of September or just not being done correctly on you --- it would remove any and all risk for the sellers, who could walk away without completing what the contract requires them to do and leave you with a mess.

No, no, NO, do not release the money: if they want it they can fulfill their part of this deal, as promised.
posted by easily confused at 2:12 AM on August 19, 2017 [3 favorites]


Hell no.
posted by fshgrl at 10:00 AM on August 19, 2017


That's what the earnest money is for, in case you back out for a reason not covered in the contract like "cold feet".

And if you back out for a reason like "seller refused to pay for repairs as contract stipulated", or "offer was contingent on inspection that has revealed horrible problem", or "title inspection reveals that this person can't sell the house to you", you are supposed to be able to get it back. But you won't, if you've released it.

I'd be more concerned that the seller *knows* there's some hidden issue with the house, or that there could be some sort of title issue, than simply them wanting the money to cover repairs. Be careful and make sure you have people on your side with your best interests in mind.

Hope you have your own agent, not the same as the seller's.
posted by yohko at 12:59 PM on August 19, 2017 [5 favorites]


I'd be more concerned that the seller *knows* there's some hidden issue with the house, or that there could be some sort of title issue

Came in to say exactly that. This is an unusual request and would raise yellow flags for me. Suggest you ask your real estate agent and/or lawyer to dig a little more deeply into these sellers and the property. And don't agree to their request for all the reasons outlined above.
posted by rpfields at 2:17 PM on August 19, 2017 [4 favorites]


Agreeing with everyone else. Whether you can or can't get your money back should be governed by (a) why you're backing out, (b) when, and (c) what the contract says about backing out then. This makes me wonder if they're aware of (or just learned of) issues with the place. (Can you be in touch with the contractors directly yourselves?)
posted by salvia at 9:23 PM on August 19, 2017


After agreeing with the sentiments above, I would add this: wouldn't the work need to be done either way? Even if you DID back out, it wouldn't likely be salable without significant sewer and electrical, so why would they think you would pay this at all? It's part of the complete package that you are purchasing, and I would say as much. I suppose it all depends on the contract you've signed, but asking you to pay money for work that would need to be done whether or not you are the buyer is a big "Sorry, NO".
posted by dozo at 7:06 AM on August 20, 2017


Do not release any money. If you happen to be in San Antonio, PM me. I'm a real estate agent.
posted by wwartorff at 4:30 PM on August 20, 2017


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