Condo buyers that have decided they no longer wish to move forward with their purchase, and have requested their deposits be released by escrow and returned to them, have a few immediate steps. The following should be done as soon as possible by any buyer who cannot or is not going to close on the purchase of a newly constructed condo.
Contact a lawyer experienced in getting buyers back their earnest money deposit (EMD).
Contact a knowledgeable real estate lawyer with experience in successfully recovering EMDs for Buyers. Crane Dunham PLLC has that successful experience, having represented more than eight buyers recover more than $2.5M in EMDs for termination of condos with purchase prices of more than $50M.
The lawyer will review the buyer’s documents.
Provide the attorney with a copy of the purchase and sale agreement (PSA) and public offering statement (and any addendums to it). Crane Dunham will review the buyer’s documents for no charge. The Buyer will be advised, again complimentary, if he or she has a legal basis to the return of your EMD.
Sign a representation agreement with the lawyer.
Most lawyers will charge for their time in real estate transactions on an hourly rate basis. Crane Dunham offers buyers in EMD cases the option of hiring them on a contingent fee basis, i.e. a percentage of the recovery obtained. If there is no recovery, then no legal fee is due or charged to the buyer.
A demand for the return of the EMD will be made.
Usually, the lawyer will make an official demand to the seller and escrow for return of all of the EMD on the buyer’s behalf, stating the reasons why the buyer is entitled to its return. Often the seller has already told the buyer that he or she has no legal right to the EMD, as it has been forfeited as “liquidated damages” under the PSA, and will not voluntarily change its mind. Crane Dunham’s demand letter will be forceful and comprehensive, and seek not only the return of the EMD, but also interest and all legal fees and costs.
Commencement of formal action to force return of the EMD.
If the seller does not agree to return the EMD, then the next step is either to file a claim in arbitration. Many PSA return disputes will be resolved by private arbitration or filing a lawsuit in the appropriate court (District Court if $100,000 or less; Superior Court if more than $100,000). Crane Dunham has filed numerous actions on behalf of buyers in a variety of forums.
Negotiations or mediation may also occur to avoid the time and expense of trial.
Even if the dispute over the EMD is brought to arbitration or to court, the parties often will try to settle the case through either direct negotiations or through voluntary mediation. The buyer’s lawyer will represent you in whatever forum and step in the process the buyer is in. Crane Dunham has a proven track record of efficiently, expeditiously and successfully resolving EMD disputes.
It is important that buyers who are entitled to return of their earnest money deposit (EMD) act promptly for several reasons:
- There may be a seven day deadline to inform the seller that the buyer rejects any addendum to the public offering statement.
- Waiting to tell the seller and escrow that you are terminating the purchase and sale agreement and demanding return of the EMD may constitute a legal waiver of the buyer’s rights to return the EMD.
- The waiting list, if there is one, to buy the buyer’s unit may purchase other units that become available, allowing the seller to try to argue that it was “damaged” by the buyer’s not providing it notice of its intention to terminate the transaction.
Please contact us for a complimentary review of your buyer’s documents.