earnest money question from a buyer

Need the help of some experience here.

I just cancelled a contract on a home one week before the scheduled closing. My insurance agent handling my homeowners insurance discovered that there had been a $6500 insurance claim on the property last October for water damage. On the seller’s disclosure, there was never any mention of water damage. The only thing close to this on the disclosure was that they had the plumbing replaced, but no more detail than that. Finding this information out at the last minute sure did not set well with me, so I backed out.

My question is, what are my options on getting my earnest money back? Is this something that will have to be handled by an attorney, or will the real estate agency just refund me my money, or do I need to pursue some other option? Any advice would be helpful. Thanks!


Usually the title company will require both you and the seller to sign forms stating who gets the earnest money. First get your agent or ask the seller to let you get the money back because of the undisclosed water damage. You have a valid reason not to buy the property and should be able to get the money without a problem. It could be a bit tougher than that if the seller does not agree. You can file a small claim in court and let a judge handle the money or yoyu may have signed mediation papers where you let a third party handle the dispute. Both of these take time and a little money. You can file the case in court yourself and just tell the facts of the case. With your evidence you should win the earnest money and court costs which are less than $100 usually. i hope the seller agrees with you and just signs the forms. If I can help any other way just let me know

Thank you,

Ted P. Stokely Jr
11505 Sw Oaks
Austin, Texas 78737

512-301-9171 home
512-587-6177 mobile

My agent says that the sellers are going to apply for the earnest money through the title company and that he would find out more info. What does the title company do in this situation? Do they have to give it to the seller?

Ted, you say that I could get signed mediation papers and let a third party handle the dispute. Can you go into more detail? Any other ideas now that it looks like the sellers are not going to cooperate? Thanks for your help!



First the disclaimer, I’ve never been in this situation, so this is what I’d do.

First of all, how much money are we talking about? If we’re only talking about $100 then it may not be worth while to fight it. If it’s $500 or $1,000 then definitely fight.

Before they can get the title company to release your money to them you will have to sign a document called “release of earnest money”. That title company is supposed to do this to cover themselves. This has always been my experience when I’m about to lose my earnest money…which doesn’t happen often.

Tell your agent to tell their agent that if they won’t cooperate with you then you certainly aren’t going to cooperate with them.

Let the title company and their agent know that you are going to refuse to sign the release. If you tell the title company that you are going to fight this they will probably keep the money in escrow. Title companies don’t like disputes. They’re neutral third parties.

Don’t rely exclusively on your agent. He/She may not know what they’re doing either. Call the title company yourself and ask them exactly what their procedures are and ask them what your recourse is.

Remember, they’re probably going to stay neutral, but at least find out what their procedures are.

Let me know what you find out and what your agent has been telling you. Maybe I can come up with some other ideas

The title company needs both parties to agree to who gets the money before anyone will get it. I have been to court twice about disputes where i thought i was right both times. Both cases we ended up splitting the money 50 % each. I offered to do this on one of them to start with but they refused. Like Stacy said it depends on the amount if it is worth a fight.

Mediation is just a sort of short cut to a lawsuit where a third party will settle the dispute. Check your papers, you may have agreed to this upon signing the contract. There are professional mediators who settle disputes like this that could be eassier and cheaper and quicker for all parties. The title company or your agent should know several or there are some listed in the Yellow pages also. Just do not use the sellers brother in law. It may be best to just split it as i had to do.

Good luck and keep us informed

Ted Jr

After initially offering to evenly split the the earnest money, the buyers were generally peaved that I didn’t decide to buy their property and wouldn’t settle for anything less than all of the earnest money ($1000 total). I then wrote a letter to the title company requesting the full amount of my money back. The title company sent a certified copy of my letter to the buyers and the buyers declined. My plan was then to just wait and take them to small claims court at some point in the future after they sold their house. I knew they were moving 300 miles away, so I was hoping that they it would be too much trouble for them to take the time to show up in court for $1000 and I would get the judgement since they would be a no-show. My agent ended up contacting me last week and said that they would be willing to accept $500, which was fine with me since this is what I offered to begin with. So I ended up getting back $500 of my original $1000 back. Just wanted to post how this ended up so that someone else may benefit…