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A recent Reddit post shared by a Wisconsin seller highlights a situation where a seemingly secure deal went sour due to missing earnest money. Here, we'll learn about the legalities of earnest money in Wisconsin and address the seller's concerns about their listing agent's role in this scenario.
The Scenario:
The seller received and accepted a $140,000 offer with an escalation clause.
The offer included a $10,000 earnest money deposit.
A contractor walkthrough was arranged by the seller's agent after the offer was accepted.
The buyer requested a price reduction after the walkthrough, which was denied.
The seller later discovered the earnest money was never deposited in escrow.
The seller pursued other options and closed on a different offer for $125,000.
The seller is now considering suing the original buyer for the $10,000 earnest money.
Wisconsin Earnest Money Laws:
Wisconsin Administrative Code ATCP 134.05(2)(a)1. dictates that a landlord cannot accept an earnest money deposit from a tenant until the specific dwelling unit is identified for tenancy. However, for real estate purchases, there's no specific regulation mandating how soon earnest money must be deposited in escrow. However, the Purchase Agreement typically outlines the timeframe.
The Purchase Agreement is Key:
A standard Wisconsin Real Estate Purchase Agreement (WB-11) has a designated section for earnest money. This section details the amount, who holds the funds (escrow company or broker), and the conditions under which the earnest money can be refunded or withheld. In most cases, the earnest money needs to be deposited within a specific timeframe after a signed contract (usually within 3 business days).
Listing Agent's Role and Potential Fault:
Standard Practice: In Wisconsin, it's customary for the listing agent to handle the earnest money and deposit it in an escrow account according to the Purchase Agreement.
Potential Breach: If the Purchase Agreement stipulated a timeframe for depositing the earnest money, and the listing agent failed to follow through, it could be considered a breach of their fiduciary duty to the seller.
Page 2 of Wisconsin Real Estate Purchase Agreement
Addressing the Seller's Questions:
What are the real estate laws regarding earnest money in Wisconsin?
As mentioned earlier, there's no state law mandating a specific timeframe for depositing earnest money in escrow. The Purchase Agreement dictates the terms.
What did the Purchase Agreement say in regards to Earnest Money?
This is crucial information. Reviewing the Purchase Agreement will reveal the specific terms regarding earnest money deposit amount, timeframe, and disbursement conditions.
Is the listing agent at fault here?
Potentially. If the Purchase Agreement outlined a timeframe for depositing the earnest money and the listing agent didn't follow through, they could be held liable.
Why wasn't the earnest money deposited?
Unfortunately, without more details, it's impossible to determine definitively. Communication breakdowns or negligence on the part of the buyer's agent or the seller's listing agent could be factors.
Recommendation:
The seller should consult with a real estate attorney experienced in Wisconsin law. The attorney can review the Purchase Agreement, assess the situation, and advise on the best course of action, including:
Suing the Buyer for Earnest Money: Even if successful, collecting the judgment might be challenging.
Pursuing Action Against the Listing Agent: If the agent breached their fiduciary duty by not securing the earnest money deposit according to the Purchase Agreement, legal action might be an option.
At My Home My Sale, we connect you with experienced real estate professionals who understand the importance of clear communication and adhering to the Purchase Agreement. A well-defined contract and a competent agent can help minimize the risk of such situations arising.
Disclaimer: This article is intended for informational purposes only and should not be construed as legal advice. For specific guidance on your situation, consult with a qualified real estate attorney in Wisconsin.
Note: A sample Wisconsin Real Estate Purchase Agreement (WB-11) can be found here https://dsps.wi.gov/Pages/BoardsCouncils/RealEstate/ContractualForms/Forms.aspx
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