OOOH.. Tough break. No one's happy when an escrow falls apart. But whether the seller gets to keep the buyer's deposit comes down to two words.It Depends!
Let's say the buyer has already removed all their contingencies in writing. Now they lose their job, or they find another house they like better, or they decide they can't stand each other, after all. They want out. In most cases, the seller would have a right to keep the deposit. After all the buyer backed out, AFTER removing their contingencies.
But HAVING A RIGHT TO THE DEPOSIT, AND ACTUALLY GETTING IT ARE TWO DIFFERENT STORIES.
In Fair Oaks and the Sacramento area, the buyer's deposit is typically held in escrow. Escrow is a neutral third party. Escrow needs both the buyer's and the seller's approval (signature) to do anything. And that includes releasing any money.
But if the buyer is stubborn, or is a jerk, or really doesn't think it's their fault the can't complete the sale, they may refuse to sign the release, even though they agreed to in the contract. Then, short of begging, reasoning, pleading or sending out Luigi, the seller has no option other than court - usually small claims court.
As a little twist, twice I have had a buyer back out, then leave the state. Now what? You can't file in small claims court against an out-of-state person.
So what happened to the $5,000 that was sitting in escrow... that rightfully should have gone to the seller? It's still sitting there today. My seller didn't get it, but at least the buyer didn't get it back either. Escrow can't do anything unless both sides agree. Ultimately, the escrow company will turn the unclaimed money over to the state.
An honorable buyer, who does what they say they will do, will sign the release, and turn the money over to the seller. After all... a deal's a deal. But that's why we have courts. Not everyone does what they say they will do.
Flickr photo by shyg's photostream
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