Real Estate purchase deposit return dilemma.

[chai-ride.livejournal.com]

This has us pretty upset, so wondering if someone has expertise or advice on this kind of thing... We rent in Davis and back in May we had an offer accepted on a condo in the area and made a $1k standard deposit, which was accepted. We then proceeded with the inspection which uncovered significant issues with the unit, and rather than negotiate further we backed out based on the inspection. The seller's accepted our backing out based on the items we found.

The problem is we can't get our deposit back from the seller's agent, because they claim there was paint damage done while removing an electrical panel during the inspection. And they refuse to contact our inspector about it or provide any evidence.

The inspector we used has been in business 30+ years and is recommended by a lot of our friends. He is serious, and really tries to inform the buyer, without drama, of all the issues. During the inspection the seller's agent began following the inspector around trying to carry on a continuous conversation and distracting him. Our inspector finally asked that he be allowed to complete the inspection without distraction, and this evidently really made the seller's agent angry, since he could not try to influence the inspector. It was a husband and wife seller's agent team, where the wife had the listing, but the husband was at the inspection, and since he officially wasn't the listing agent he could also actually avoid answering any questions about the property.(I think this the real problem here is the husband got upset he couldn't steer the inspector his way, and now his wife, the listing agent who was not even there is stonewalling).

After they released us from the purchase offer we then receive a claim of $165 for paint damage. The condo was in good shape inside, but had a lot of paint chip issues throughout (we took photos). I was with the inspector, and watched him remove a few screws, take down the panel, and put it back. The panel was on a painted wall, but he did nothing more than remove it for inspection.  They insist they take the money out of our escrow deposit, and won't release it otherwise.

I am certain if there was damage, and they had a photo or something that our inspector would pay for it. But they refuse to contact him, or provide a photo, and are holding our escrow hostage, proposing they take the damage out of the $1k. Our real estate attorney has said they cannot do that, and has written the seller's agents several letters to no avail.

At this point it just seems like the seller's are basically taking their personal issue out on everyone and wasting the sellers and our time to make a point. I am certain that if there is a damage claim, and if the seller just talked with us directly or even better with our inspector this could be resolved in 5 minutes. The condo has sold and closed some time ago as well.

I think everyone knows there is an element of "well why not just pay it an get it over with?" Of course we can do that, but it's hard to do that when a claim is just made up, with no evidence, and people are taking advantage of a situation. And my sense is it's not even really the seller driving this but his agents.

I would be interested in, particularly from another agent perhaps:
- if anyone knows if they can really hold our escrow deposit indefinitely?
- is there anything else we can do to get our deposit back?

Thanks!

Comments

[chai-ride.livejournal.com]

Sorry, trying to figure out the cut thing....

[surrealestate.livejournal.com]

Do you have your own buyer's agent? What did they say about it?

[chai-ride.livejournal.com]

Yes we do. They also said the seller's agent can't hold the escrow for this, but can't seem to do anything about it either.

[pierceheart.livejournal.com]

It's tempting to ask who the seller's agent is, so everyone here can avoid buying from anyone listing with them, in the future.

[surrealestate.livejournal.com]

As James said below, you have options. To say the least, it is odd that the property has sold without this issue being resolved. I am not a lawyer, but it's possible you may be able to get your money back and then some.

I too am curious as to what real estate office handled that listing, as one course of action may be to contact the manager there. Another is to file a 93A complaint letter with the board of licensure. I'm guessing all these options and more will be covered in Mr. Norton's email.

[miss-chance.livejournal.com]

Our real estate attorney has said they cannot do that, and has written the seller's agents several letters to no avail.

I'm sorry I don't have better advice for this purchase, but if LiveJournal is your recourse after your attorney has proved ineffective, for Goodness Sake do *not* go into a real estate purchase with that attorney!!

You can get a new attorney, for future transactions, but for this one I believe you will pay a lawyer at minimum the same amount these people are stealing from you.

My call would be to capitulate to the sellers, pay the money, and chalk it up to being robbed. It sucks that that happens, but for that amount of money, you can't really win legally.

[mamajoan.livejournal.com]

My suggestion would be to google and find the template for a "30-day demand letter." (you might even be able to find it on the state of MA website) This is the letter that you're obligated to send someone before you take them to small-claims court. Fill it out and send it to them demanding that they return your $1000 deposit. I'm betting that just the threat of taking them to small-claims court will scare them into giving your money back; if not, you have to decide whether you actually want to go that far.

[dilllll.livejournal.com]

Exactly this. And, if it comes down to small-claims.. it's a pretty painless process. If you're willing and able to do the research, you don't even need a lawyer.

Are they licensed? Threaten legal action? Fight vs flight?

[djethan.livejournal.com]

I am not associated with this situation at all, but I find it angers me. I have no legal training so my thoughts are as a layperson who has been through several real estate transactions.

As the buyer you seem to have done everything by the book. Was there actual work done on the painting with receipts in the amount of $165? I.e. have they proven work was done, even if it wasn't a legit claim? I would think the claim should come from the seller and not the seller's agent. The $165 would be due the seller, not the seller's agent.

I wonder if you can find out what license(s) the agent has and find some recourse that way. Maybe there is a way to file a formal complaint via whichever agency issues the license(s).

Additionally, perhaps you can step it up via your attorney and threaten to take them to small claims court or whichever venue would be appropriate.

I will say that it sounds like the money issue is limited to $165. At some point it may be more beneficial for your mental health to let that $165 go and be over with it, to get the remaining $835. It seems that it boils down to fight or flight...

Re: Are they licensed? Threaten legal action? Fight vs flight?

[inahandbasket]

I agree with all of this.

You'll need/want to have a real estate lawyer for your purchase anyway, might be a good time to find one.

Re: Are they licensed? Threaten legal action? Fight vs flight?

[mamajoan.livejournal.com]

It does say right there in the post, "our real estate attorney said...."

Re: Are they licensed? Threaten legal action? Fight vs flight?

[inahandbasket]

oh hey lookitthat.

Yeah, time to escalate in that case, I'd go up the chain at the seller's agency if that's a possibility.

all kinds of crazy

[jamesnorton.livejournal.com]

i am not an attorney, but i am licensed and have been in the business full time since 1986 - having said that...aside from the glaring problem of not having a supposed real estate attorney that can't resolve this all with one phone call...here are the short answers:
1. no they cannot hold your deposit
2. you can do a whole bunch of stuff to the agents, the real estate office and the seller -
it'd probably be a good idea for me not to go into what your options really are on here. why don't you email me at jamesnorton@yahoo.com and i'll be happy to help point you in the right direct.
i'm sure even without an attorney, after i point you in the right direction, you should be able to resolve this and get all your money back fast.
cheers
jamie norton

[miss-lisa-ma.livejournal.com]

If you go to this state Consumer Affairs page and scroll down, (http://license.reg.state.ma.us/public/dpl_contact_info/dpl_contact_info.asp) you'll see the place to click to reach the appropriate licensure agency and file a complaint against a real estate sales agent.

[jamesnorton.livejournal.com]

good pickup on that lisa...thats one of the things id suggest

[chai-ride.livejournal.com]

Thanks for this input, some things we have tried, others we haven't yet.

Last week I asked them again (after two months) to send a receipt for the work and a photo, and they only sent the receipt.

I had an initial discussion with the Real Estate Board. Who initially, after I only began to describe the situation, indicated I could not complain about this, but when I finally got them to hear out the entire story, they agreed I should file a complaint on this. The contract specifically ties the escrow deposit to the parties reaching the P&S stage after inspection, with the option we took of quitting based on the inspection- that's all. It does have a small vague item in the boiler plate that the seller needs to release the agent to return the deposit. My understanding is this only applies to releases us because they agree we had valid claims after the inspection- which they did. Ugh. It does seem to make sense to file the complaint next.

Thanks for the tip on the 30-day letter. I will see if our lawyer's letter served to that effect, and if not, will do that too.

It still seems unclear even who to take to court. The seller's agent because they are supposed should return the escrow, or the seller who is obliged to release this. I suspect this boilerplate P&S real estate agents use needs to be improved so this doesn't happen to others, or at least is clear going in.

[jamesnorton.livejournal.com]

1. look for licensing board and file complaint
2. file complaint with secretary of state
3. find out if they belong to a board of Realtors and file complaint
4. get a more aggressive atty or the one you have - to send a 93A letter

the purchase contract should reference your rights moving forward and the release of earnest money if you decide not to move forward, but typically only for non-satisfaction with the inspection - there is no way to indicate retaining the deposit for damages alleged to have happened during the inspection - thats a completely different issue, and, subsequently has nothing to do with the money being held in escrow as earnest money deposit.

this is insane to me that they would try to hold the money based on supposed damages incurred during a home inspection - the purchase contract, the offer, nothing involved with the transaction spells out any remedy for this, and they have zero legal right to do it. less than zero.

jn

[copperpoint.livejournal.com]

Well, think of it from a sellers point of view. While a lot of their actions seem shady (and you definitely shouldn't be stuck with the extra bill), I was under the impression that this sort of deposit generally wasn't refundable.
You made an offer and they accepted it, and when they accepted it they took the unit off the market. Now, since the purchase has not gone through, they have missed out on opportunities to sell it. That's the whole point of a deposit, so if you back on the sale (even for justifiable reasons), the seller still receives some recompense for their lost time.

[jamesnorton.livejournal.com]

you'd be right copper, but, in a purchase transaction, it's a meeting of the minds. earnest money deposit shows intent of the buyer and they agree to perform certain due diligence, etc. and the seller shows good faith, and agrees to wait a certain amount of time for the buyer to perform. typically these benchmarks are harder and harder to reach, which over time makes the deposit money that much more retainable by the seller.
in this case, it is clear, no standard (or otherwise that i have ever seen) purchase contract has a provision to retain the earnest money deposit for potential damages. one would have nothing to do with the other - and would be easily dealt with, if there was proper and open communication.

[jamesnorton.livejournal.com]

and not for nothing, but whoever the attorney is that is involved with this as their "real estate attorney" should go back to law school - simple RE101 here.

[miss-lisa-ma.livejournal.com]

Well, that depends on what the paperwork prior to inspection stipulated. From what I understand, it can vary from deal to deal as well as jurisdiction to jurisdiction.

The OP said that the seller ACCEPTED the backout, however, and the condo has since sold. Something still doesn't add up about behavior of the seller/seller's agent. Refusing to document alleged damage doesn't cut it.

[jamesnorton.livejournal.com]

lisa's right - there's something else going on here...especially on something so outrageously blatant. you dont have to be an attorney or be dispensing legal advice to know what they've done - the seller and more particularly the real estate agents/office - is totally illegal.
damage aside, one has nothing to do with the other...
which makes it even more suspicious to me...

[pierceheart.livejournal.com]

Something still doesn't add up about behavior of the seller/seller's agent.

I disagree: douchebaggery.

It was a husband and wife seller's agent team, where the wife had the listing, but the husband was at the inspection, and since he officially wasn't the listing agent he could also actually avoid answering any questions about the property.

The seller's agent team sounds extremely shady, and should be avoided at all costs.

[jamesnorton.livejournal.com]

i agree: douchebaggery, definitely.

when buying a home, unless you know exactly what you're doing (a lot of people think they know what they're doing, but they really don't), then you should use a buyer's agent (sign the buyer's agent contract, but you can find one that won't really charge you for services - getting their commission from the sale, unless there's an extenuating circumstance of course) who will represent your interests in the transaction. that being said, you should also consider finding an attorney that represents your interests (but be careful - attorneys like to think they know what they're doing as well, and the more often than not, don't).

if you find the right buyer's agent, who has a lot of experience, doesn't overstep his/her boundaries legally and makes you comfortable - you might be able to avoid the attorney option, but even today, 25 years after buying my first home, i still use an attorney - and i would consider myself an expert at purchasing/buying/selling a home.

food for thought.

[pierceheart.livejournal.com]

I was under the impression that this sort of deposit generally wasn't refundable.

I am not a lawyer, but from a quick googling of ernest money inspection refund, it seems most earnest money contracts expressly allow for the refund of the money if an inspection finds issues.

[jamesnorton.livejournal.com]

there is a standard clause in an offer to purchase contract that allows for satisfactory home inspection withdrawal without forfeiture of earnest money deposit. tip for anyone who cares: there's a small spot in this clause that states if anything is found to not be acceptable in the home inspection that would be in the "aggregate of $____" - don't ignore this, and don't put a dollar amount in either. fill in the spot with "0" which means if you don't like the report, for any reason, even if the remedy would be minuscule, you can just back out of the deal and have the earnest money deposit returned.

quite frankly, that the real estate office supposedly "escrowed" an earnest money deposit is a bit alarming to me. for a number of reasons i don't need to bather on about...and they didn't actually put it into escrow, not according to MGL unless you gave the agency a filled out W9 for yourself.

if you didn't, then they certainly didn't escrow it properly.

[intuition-ist.livejournal.com]

since the seller's agent has pointed out a specific area that was damaged, and the house has since sold, there's a good chance that the buyers took photos during the process. if you could get them to give you a photo of the "damaged" area (especially if it had a date stamp, and was obviously not damaged), I think you'd be able to make more headway -- whether with your attorney or small claims court or whatever.

it's always helpful when you're in a dispute to have proof that the other guy is lying. :)

Somerville real estate broker charged with embezzlement

[djethan.livejournal.com]

Not sure if this is related:

http://www.boston.com/yourtown/news/somerville/2010/08/by_bella_travaglini_town_corre_1.html?p1=HP_Well_YourTown_links