Huntsville, AL asked in Contracts and Real Estate Law for Alabama

Q: Should I sign the release of the earnest money that holds me at fault for the termination of the sale?

I signed a contract to sell my house in Alabama with the realtor holding the earnest money. The contract was made for two weeks later than the verbally agreed on 45 days. They came back a week before the close date and told me that the loan paperwork had been overlooked for three weeks by the lender, and they asked for an extension. I signed another contract for two more weeks. I completed the punch list and moved out of the house four days before the close date. Two days before the close date they called and said that they needed another month to get IRS transcripts.I didn't sign a third contract. They sent me a release of the earnest money to sign that holds me at fault for termination of the sale. Should I sign the release?

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1 Lawyer Answer

A: You haven't provided enough facts to permit anyone to give you a definite answer. This problem will be controlled by the fine print in the contract. All that said, I will say tentatively that you may - repeat MAY - have grounds to refuse to release the earnest money, and instead have it forfeited to you. You cannot get a clear answer without consulting a lawyer and having him or her review the contract. I suggest you hire a competent real estate lawyer immediately. You should do this without delay, because if you don't the realtor will in all likelihood turn the problem over to his or her lawyer, who will quickly file an action for what is called "interpleader", in which the money is paid into court together with a complaint that says that there's a dispute between you and the defaulting buyer over the money, and asking the court to resolve the matter. The problem with that is that in an interpleader action the court will award the realtor's attorney a portion of the money for his reasonable fees in bringing the action for interpleader, thereby shrinking whatever money you get back, even if you win.

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