As if the deal to sell House #1 falling through wasn’t annoying enough, now I’m hitting a snag with getting the title company to release the earnest money to me. Here’s the condensed version:
1) As part of the contract, the buyer deposited $500 in earnest money with the title company.
2) Deal falls through.
3) The buyer and the buyer’s agent sign the earnest money release form, as do my wife and myself.
4) The title company refuses to release the earnest money to us, however, as the buyer’s lender (who ultimately bailed out and didn’t approve the buyer’s loan) has still not paid for the appraisal they requested. The appraiser invoiced the title company for their services.
5) The title company’s rationale for not releasing the earnest money is that because the appraisal occured on the physical property, the appraiser could potentially file a lien on the property, seeking payment from either the title company or the property holder.
For all you smart folks in the audience, a question: is this standard operating procedure in a case like this? I haven’t encountered this before or heard anything similar, but I’m having a hard time understanding why releasing the earnest money has anything to do with the core issue here, which is the fact that the appraiser hasn’t been paid, and the title company was invoiced by the appraiser, with the expectation that the appraisal fee would be paid by the buyer’s lender at closing.
I get why the title company is trying to cover their own butts by refusing to pay us the earnest money, but I can’t help but think it’s pretty poor customer service, as it seems to me to be mixing apples and oranges, and they’re withholding it simply because it’s money they can withhold, slightly mitigating any financial exposure they might have if the appraiser ultimately comes after them for the money due.
Is that standard operating procedure in such cases, as far as how the title company is acting? I’m honestly not sure if I’m getting screwed over or if it’s just the way things are in a situation like this. Many thanks for any insights.
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