Terminating a House Contract and Getting Your Deposit Back

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By Adam R. Seligman

I often get calls from real estate agents regarding residential real estate deals that end in disputes. So the natural question I always get is, if the Seller refuses to return the deposit, how do I recover my client’s deposit?

Usually the call comes after the Seller refuses to sign a Cancellation of Contract arguing that the Buyer did not provide an adequate reason for termination or defaulted in some other way.  Also note that when money is held by title companies, or other third parties acting as escrow agent, those parties can not release the deposit to the Buyer without a court order or signed release.  In many cases the title company will instead transfer the deposit to the county court by filing an interpleader action, thus costing more fees and costs.

My initial answer is that there is no immediate solution.  There isn’t much a real estate agent can do at this point.  The Buyer and Seller need to resolve their legal dispute, either on their own or with the help of lawyers.

Agents (and their Buyers) often think the Buyer is automatically entitled to the deposit if they terminate under Section 12 of the FAR/BAR Contract, as it provides that “If Buyer determines, in Buyer’s sole discretion, that the Property is not acceptable to Buyer, Buyer may terminate this Contract by delivering written notice of such election to Seller prior to expiration of the Inspection Period.”  However, there is a big difference between having a good legal case and actually recovering the deposit.

When a Seller refuses to end a real estate contract dispute amicably, the Buyer must now decide on a legal strategy (mediation and/or litigation) to pursue the deposit.  Many factors go into planning an effective legal strategy, such as the amount of money in dispute, the resources of both sides and the persistence of each party.  Sometimes these factors are just as important, or even more important, than whether or not the Buyer has a good case.  If the Buyer is victorious in court, the Buyer will then have a judgment that entitles them to money from the Seller.  Hopefully the Seller will comply with the judgment and pay the Buyer quickly, but if not, the Buyer may need to take additional legal steps to enforce the judgment.  There will also be an appeal period during which either party may ask a higher court to review the lower court’s decision.  The process can be long and expensive so there are many factors to consider.

Keep in mind that every case is different, so agents and their Buyers should always encourage the parties to consult with a lawyer to get perspective on the strengths and weaknesses of their case, along with the equally important questions of how much it might cost to pursue the matter and how long it might take.  Ward Damon is very familiar with these disputes and can assist Buyers or Seller in such escrow disputes.

Adam R. Seligman, concentrates his practice in the areas of residential and commercial real estate law for Ward Damon.  If you need help buying real estate or establishing residency in Florida, please contact Adam at aseligman@warddamon.com or call 561-842-3000.

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