Legal Question in Real Estate Law in California

Re: Buyer's Deposit

If your sales agreement provided for forfeiture of the deposit as liquidated damages if the purchase did not close, the buyer likely would forfeit the $3,000. An attorney would need to review the agreement and escrow documents. Has the buyer informed escrow in writing that he's not proceeding? If so, you could demand in writing that escrow release the funds to you pursuant to the escrow instructions and the signed sales agreement. I doubt that the TITLE COMPANY is holding the funds.

Re: Buyer's Deposit

You may have a claim for the deposit, but we will have to review your documentation and agreement. Sometimes, a demand for mediation or arbitration is necessary. Please call me if you have any other questions.

Re: Buyer's Deposit

You raise two separate issues:

1. Can you keep the deposit?

This depends on a few things. First, if you used the California Association of Realtors contract, and did not modify its terms, typically, a buyer's deposit is not at risk until the buyer removes contingencies.

Contingencies do not get removed by the mere passage of the contingency period (typically 17 days). Rather, they must be removed in writing.

If the buyer never removed contingencies, in writing, he can probably take back his deposit, because he would not have breached the contract.

2. Can you force the escrow company to give you buyer's deposit?

First, Mr. Cohen appears right that the funds must certainly be held by an escrow company. There are some companies that provide title insurance and escrow services . . .you may be dealing with one of these.

The escrow company is a neutral third party. They are not going to release the deposit to you without the signature of the buyer. The will not act in the roll of judge, and therefore will not decide whether or not the buyer is in breach, and hence owes his deposit to you.

They will keep the deposit in escrow until either the buyer signs an instruction releasing it to you, or you legally pursue the deposit.

If you signed a standard C.A.R. contract, you would first go to mediation. If mediation does not yiels a settlement, then, if you iniitialed the arbitration provision, you would arbitrate. Otherwise, you could sue in court.

The C.A.R. contract has an attorneys' fee provision, which may motivate the buyer to release his deposit if, in fact, he is in breach of the contract.

Feel free to call for further consultation.