Failure to Return Earnest Money Shouldn’t Stop Home Sale
Question: On the day before the closing of the sale of our Gilbert home, the buyer refused without any reason to sign the closing documents at the title company. We need to close this sale of our Gilbert home to close on the purchase of another home that we are buying in Mesa. Our real estate broker said “no problem if there is no closing” because she already has two prospective buyers for our Gilbert home, and our Gilbert home should sell to a new buyer in the next 60 days. When our real estate broker contacted the seller of the Mesa home about our problem, the seller was very nice and gave us a 60-day extension to close on the Mesa home. Everything seemed to be getting back together when we just learned from our real estate broker that the original buyer of our Gilbert home is demanding a return of $5,000 of his $10,000 earnest money deposit, and that, if we don’t pay him this $5,000, he will “delay” the sale of our Gilbert home to a new buyer. Although we believe that we are being blackmailed, should we simply pay this $5,000?
Answer: If the only reason that the buyer is not purchasing your Gilbert home is “buyer’s remorse,” you should be entitled to cancel the purchase contract, and a responsible title company should pay the entire $10,000 earnest money deposit to you. In the unlikely event that the buyer would then file a lawsuit to “delay” the sale of your Gilbert home to a new buyer, the buyer would have to record a lis pendens. A lis pendens (Latin for “pending litigation” concerning real estate) is only available, however, if the buyer claims a right to own the home. Your buyer, however, doesn’t claim a right to own the home but just wants the return of $5,000 of his earnest money deposit. Therefore, your buyer should not be able to “delay” the sale of your Gilbert home to another buyer.