Earnest Money - Are we entitled to keep it?

[todd1912]

What is the name of your state? Tennessee

I'm selling a home in Tennessee. We received two offers on the same day and signed/agreed to the contract that offerred full-price ($112,500) for the property - thereby rejecting (and losing) the second offer. The only stipulation in the contract was a "contingent upon appraisal". Approximately 4 days before they were to do a walk through, they sent an appraiser. The appraiser "supposedly" came back with an appraisal at around $53,000. Our real estate agent said "no way" so they sent another appraiser and this one came back with an appraisal around $83,000. The next day the "buyer" asked for her earnest money back.

However, there are other "extenuating" circumstances to consider:
1. The "buyer" works for the mortgage company where she was obtaining financing. It's possible the buyer knew the appraisors, simply wanted out of the deal, and "had" it appraised low.
2. We requested a copy of the appraisals and have not received one. Since the contract was contingent upon the appraisal, it seems that we would have a right to review them, if they didn't appraise at the sale/offer price.
3. We have refused to sign the release of earnest money.
4. We asked our agent to continue to try to get copies of the appraisals. Are we entitled to be able to view them?
5. We are not on friendly terms with our real estate agent, due to her lack of performance through the initial couple of months of the house being on the "market". But, we asked her to check with her broker to see if we were entiled to the earnest money. The broker told us today that he didn't see any reason to NOT release the earnest money back to the "buyer".

We feel that we are entiled to the earnest money because:

1. We lost the second offer/buyer, who offerred $105,000 - so we lost that sale (after not getting our house they put in a contract on another house)
2. We lost approximately 4 weeks of marketing by the house not being officially "on the market" and active for showings
3. We have not received a copy of an appraisal to insure that one was actually completed. Are we to simply "take their word" that an appraisal was done and that is was "unsatisfactory"?
4. We spent time and money to rent a truck to vacate the house in time for the walk through before closing.

Are we entitled to the earnest money? We asked that our agent get with her broker about filing/seeking an Interpleader - but all she said was that she would check with her broker about what could be done. She knows we are not going to renew the contract when it is up at the end of November, so I don't have the highest confidence she will act in our best interest.

Please help

p.s. I forgot to mention that the "buyer" put in the contract for $1,000 in earnest money and provided $500 at the time the offer was submitted, but was late in getting the other $500 to the broker - it took her about another 5 business days, and normally, the earnest money was to be deposited in 3 business days from the agreement to the contract.

I also forgot to mention that the $30,000 increase in the appraisal happened in about a 2 hour period-of-time, and according to our real estate agent, the "lockbox" on the house was NOT accessed by an appraisor - which means they didn't even go into the house to do an appraisal. If they did one, they must have simply stopped at the property and viewed it from outside - if they even did that.

[pojo2]

Are we entitled to the earnest money?

No you are not entitled to the earnest money unless you can have your own appraisal done to PROVE they dickered with the appraisals to get out of the contract.

That would cost you about 300-500 dollars unless you can first get a completely independent of this situation, agent to give you an estimate of what they think the property is worth.

[dallas702]

Your agent had you asking $112,500 for a house that appraised at $53K and $83K? Maybe you should be suing her for wasting your time. How did she arrive at your asking price? Didn't she do a market survey?

You'd have to prove any collusion or fraud about the appraisals to keep the $1000. It would probably cost 3-4 times that to make the case. Maybe more.

You need a real appraisal before you go any further in any direction. Then, get a new RE agent who knows what he/she is doing.

BTW: a good way to get a free appraisal is through your local RE education dept. or a local community college that offers RE courses. Many times their students will do properties for their coursework. I'll bet a first time student can come closer than 50% off the value.

[lookitsmary]

did you check the value on [url]www.housevalues.com?[/url] I would check on that and then I would ask the question about there being a conflict of interest on the mortgage company employee purchasing the home. What is her/his job title in the mortgage company? processor? Underwriter? review appraiser? and if they had any interaction with the internal processing of the file I would have great concerns.

[todd1912]

Thanks for the input. I felt as though we may need to get an independent appraisal.

Also thanks for the suggestion about possibly getting one from a local RE Appraisal school.

The asking price was derived from some local comps in our area. There are 3 or 4 other houses within just a few blocks that are similar in size, bedrooms, etc.

Our house is approximately 836 square feet in the "main house" (2 BR, 1 BA) and has a guest cottage (studio plus full bath) that is approximately 300 square feet for a total of approximately 1136 square feet - or just right at $99/square foot.

The other houses ranged from 1100 square feet to 1300 square feet and SOLD for between $121,000 and $125,000 - all 2 BR and 1BA - but ours has the additional guest house with additional bedroom and bath.

Can/should they have included the additional 300 square feet of living space in the overall appraisal of the property? As they state they didn't include it.

[dallas702]

The inclusion of the separate guest house's square footage into the home's "living space" may vary with state guidelines, but as an enhancement to the property it certainly should have been included,described, and given value. If it was not specifically defined and added to the overall value by the appraiser, then he failed to do his job correctly. It takes a little more effort to do it right, and it sounds as though your appraiser didn't really examine your property.