Saturday, January 16, 2016

What To Do With The Earnest Money When Your Buyers Disappear

Though I usually represent people who have purchased a home, sellers and their agents contact me from time to time with questions that arise during the sales process.  This past week, a real estate agent asked me what to do with disappearing buyers.  These are buyers who agree to purchase a property and put down a few thousand dollars in earnest money but then completely drop off the face of the earth.  They will not close on their purchase due to financing, the appraisal, cold feet, or some other excuse.  The sellers do not want to sue them for breach of contract because they have since sold the property to other buyers.  The sellers' real estate agent has sent the disappearing buyers a WB-45 Cancellation Agreement & Mutual Release with no response.  The agent wants to close her file and does not want to continue to hold the disappearing buyers' money.  What can she do?

This situation is covered by lines 376-94 of the WB-11 Residential Offer To Purchase and Wis. Admin. Code s. REEB s. 18.09.  If at least sixty days has passed since the date when the disappearing buyers were supposed to close, the agent should have an attorney review the transaction and direct her on how to disburse the earnest money.  Since the buyers have disappeared, that attorney will almost certainly direct the agent to disburse the earnest money to the sellers.  Upon receipt of the attorney's directive, the broker should send notice of the planned disbursement to both the sellers and the buyers by certified mail to their last known address.  Assuming that the buyers do not magically reappear, the agent can disburse the earnest money to the sellers after thirty days.  The language of the WB-11 offer should protect the agent from being sued for this disbursement as long as she follows these rules and acts in good faith.  

Please contact me at rudolphkuss@stevensandkuss.com if you ever need an attorney to review a real estate transaction and direct the disbursement of earnest money.