Legal Question in Real Estate Law in California

We tried to sell our California house of 50 years and two days before escrow closed, (28 days after the contract was signed), the buyers said they could not get a loan and backed out, (it seems they had IRS problems). We had already hired a moving company, emptied out the house and moved out, because the buyers wanted to move in, "as soon as possible". Our "agent" said the $5,000 earnest money would come to us, per contract. The house went back on the market at a lower price to move it quicker, (per advice from Agent), and we incurred a $8,000 loss on the second sale. The 1st buyers are fighting the release of the earnest money and our "Agent" has abandoned us. It is now an interpleader and we have to answer to the Title company who held the earnest money. How do we file an "answer", and what California forms do we need to fill out? Are we wrong to think we are owed the earnest money per contract? The Superior Court clerks are not helpful and legal aid seems to do family and immigration law. Thanks


Asked on 3/22/10, 2:33 pm

1 Answer from Attorneys
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

Your agent's lack of helpfulness is a distressing sidelight on your case. Agents and brokers who represent sellers have fiduciary duties to their clients - part of the price of anticipating a big commission upon a successful closing. Without knowing more facts, I'd suggest that you anticipate possibly needing to lodge a complaint with the California Department of Real Estate, which licenses these professionals and expects that they will use their skill and experience to produce a good result for their clients.

On the strict issue of refund versus forfeiture to you of the buyers' deposit, this is mainly a matter of contract, and a court deciding the interpleader will examine its terms with a strong magnifying glass. Did the buyers default, or was their failure to close excused by some condition of the contract? Fairly often, a buyer's obligation to close is expressly conditioned upon their being able to obtain a loan upon certain terms, and if they are unable to obtain such a loan, despite diligent efforts to obtain one, the condition precedent fails and the buyer is relieved of obligation under the contract and is (often, at least) entitled to a refund of the earnest money.

You should be able to get a free consutation with a local real-estate lawyer on this, but I am fearful that his or her conclusion may be that the buyer did not default and is entitled to a refund. Also, how much can you afford in the way of fees to fight for $5,000, or even $13,000?

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Answered on 3/27/10, 9:43 pm


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