In my forty years of residential real estate sales, I have yet to meet a buyer or a seller who was not well intended when it came to buying or selling a home. However, fast forward to today, when the repercussions of the Covid pandemic are disrupting every industry including unruly airline passengers and frustrated buyers and sellers. Buyers are depressed and angry, being priced out of the market due to multiple offers and escaping prices. Sellers are unwilling to consider even health and safety repairs with a ‘Let the buyer fix it. I’ve lived with it that way for twenty years’. However, it is not always about the leaky faucet but more about feelings—feelings of being left out or being asked to do too much, in a world that for many has been turned upside down by illness, death, job loss or just an uneasy feeling of what’s next? Another variant? Another disruptor?
So when the transaction gets ‘disrupted’, the dispute is always about who gets the earnest money deposit. Most purchase and sale agreements are written on an Alaska MLS form created by an attorney and then word smithed by the MLS forms committee. Most licensees follow the fill in the blanks with due regularity and fore thought. There are, however, plenty of opportunities for error, particularly when it comes to home inspection repairs, time extensions and property disclosures. It is the participating brokers’ responsibility to resolve the disposition of the earnest money. Sometimes, all it takes is being a good listener to resolve the dispute or in some cases a few hundred dollars shared between the buyer, seller, and licensees in for the deal to move forward or end in termination. When there is no resolution, the next step is mediation which can cost $300 per buyer and seller or $500 if the licensee is not a realtor. Any mediation result is advisory only.
Short of going to court, it ultimately becomes the real estate broker’s responsibility to decide on the disposition of an earnest money. The broker has the right to disburse, “may make the determination as to the cause of the failure of the purchase agreement and distribute the earnest money accordingly after giving notice to the cooperating broker. The purchase and sale agreement also provides an indemnification to the broker by all parties to hold the broker harmless. Bottom line, the disposition of the earnest money lies square in the broker’s court as to what if any fault had occurred in the transaction. Today, some brokers are eliminating their fiduciary trust responsibilities by placing earnest money in the hands of a title company. It is my understand, however, that the title company will simply hold the deposit until a decision has been mutually agreed upon by the brokers. That could take days, weeks or even months. As I’ve counselled my 72 realtors, the best resolution is a negotiated settlement. There is no win/win when it comes to resolving money matters in real estate or elsewhere. The best win is most likely when everyone goes away a little unhappy and buyer, seller and licensees move on to the next opportunity.
As always, thank you for your many referrals. Please feel free to give me a call with any real estate questions, 907-229-2703.