Escrow Disputes, Are They Really Worth It?

Have you ever been involved in a nasty escrow dispute? Whether we like it or not, the reality is that not every deal closes. And in some of those cases, the seller is, to put it mildly, upset. That doesn’t mean that the seller should automatically resort to the dreaded “claim on the deposit.” There are a number of factors a seller should consider when doing so:

1.       Remember most contracts provide for prevailing party attorneys fees. If the seller is wrong, they could be subject to attorneys fees. THERE IS RISK TO THE SELLER!

2.       Does the seller really want to be embattled in an escrow dispute, the result of which could be a lawsuit in court?  Remember, in most instances, the buyer has no choice but to resort to the legal process to get their money back. That process is both time consuming and expensive (and see number one above).

3.       Does the seller have any culpability for the failure to close?  In some cases, the seller is not entirely blameless. Did the seller perform perfectly under the contract.  Were they ready, willing and able to close?  Did they do everything that was required of them to facilitate the closing or otherwise put the buyer on notice of the buyer’s anticipatory breach? And if the seller is even remotely at fault (or if the seller did not follow the letter of the contract perfectly and prove they did all they could to close timely), that escrow dispute could result in a much bigger problem, namely an aggressive real estate lawyer tying up the property legally until the dispute is resolved.

4.       Is the seller comfortable keeping the property off the market until the dispute is resolved? Generally it is unwise to market (or even execute contracts) until (a) either an escrow dispute is resolved and the contract properly terminated, or (b) the seller gets a legal opinion that there is no chance that the buyer might attempt to cloud the seller’s title legally (see 3 above).

5.       Is the deposit amount significant enough to even justify the hassle and risks set forth above?

6.       Does the Seller understand that they may not be entitled to the full amount of the deposit and that third parties, such as agents, may be entitled to portions of the deposit?

For these, and possibly other reasons, we would caution any seller to think very carefully before they refuse to execute that release and cancellation of contract. In many cases, it’s best just to move on (particularly in this market). As always, we strongly advise any seller to consult with their real estate attorney before they decide to engage in an escrow dispute.


Berlin Patten Ebling, PLLC

This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.

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