Ask the Agent: Why Can’t I Get My Earnest Deposit Back?
Fresh from the pages of Trulia Voices, where California law always seems to be the solution to Arizona legal questions …
Seven answers in, one from Arizona. Apparently our real estate laws are more popular across the country than I ever imagined. My favorite response gets the basic answer right for all the wrong reasons, courtesy of an agent in Carlsbad:
Being that, the terms of your contract are vague, at that. It would be wise of you to consult with an real estate attorney.
Contacting a real estate attorney clearly is the right answer … but it has nothing to do with the contract being vague. In fact, if the Arizona Association of REALTORS’ standard Residential Resale Purchase Contract was used, determining who gets the earnest deposit when there’s a cancellation is usually (usually being the operative word) straight-forward.
(Standard disclaimer: I’m a real estate agent not an attorney. For best results, don’t look for the free advice and get an attorney. Mileage may vary. Use only as directed.)
As a general rule the buyer is able to cancel the contract for a handful of different reasons and retain their earnest deposit:
- At buyers’ sole discretion during the (generally) 10-day inspection period.
- If the buyer requests repairs but the seller refuses to make all requested repairs.
- If after a good faith effort buyer is unable to qualify for a loan.
- If after a good faith effort buyer is unable to qualify for a loan without conditions.
- If the home doesn’t appraise for the negotiated sales price.
- If for some reason there is damage to the home greater than 10% of the purchase price whether by weather, act of God, etc.
There are a couple of others involving cure periods but we’ll let those go for now.
As long as the buyer cancels during the proper time period for one of the above reasons, the escrow company ought to return their earnest deposit.
This is assuming an escrow company is being used. Since this question was off Trulia there is an excellent possibility this was a purchase and/or sale involving an unrepresented buyer and/or seller who may or may not have know they ought to have used an escrow company to hold the earnest deposit and make sure the sale is executed properly.
As Jay rightly pointed out in his response, it’s up to the escrow company to determine what happens to the earnest deposit. AAR’s standard contract even says so. Of course, if you elect to move forward without representation and without that contract … using, for instance, one of those two-page fill in the blanks from Office Max that have no real basis in Arizona law, then you may have a problem on your hands
(Apparently there’s some justice on Trulia Voices … the lone local voice received the only almost coveted “thumbs up” for his answer. Good to see.)
Technorati Tags: real estate negotiations, Phoenix real estate, Trulia Voices
Popularity: 10% [?]
It looks like thumbs down is the new game being played by participants. I liked the “dribbled” answer, were they playing basketball or writing a real estate contract.
Maybe they thought they were writing for the Zebra. Who knows …
I’m enjoying the thumbs down thing, by the way. Especially for “I’m not in your area but call me so I can get a referral fee for not doing anything.”
[…] Jonathan Dalton wades into battle with the self appointed department of disinformation hanging out of Trulia Voices. Ask the Agent: Why Can’t I Get My Earnest Deposit Back? […]
“I’m not in your area but call me so I can get a referral fee for not doing anything.”
Jonathan: Mind if I post that as an answer? It would reall reallly help my Trulia Score! I’ll split any referral fees with you!
Go for it!
[…] It’s true that many homeowners have purchased or sold real estate without assistance from a real estate professional, much less a REALTOR. But it’s also true that many find themselves in situations that easily could have been avoided with a little more knowledge, a little more experienc…. […]