By Christopher Combs
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Buyer Can’t “Blackmail” Seller With Earnest Money

  Question: On the day of the closing of the sale of our Peoria home, the buyer refused without any reason to sign the closing documents, even after we gave the buyer the required three-day cure period notice. We need to close the sale of our Peoria home in order to close escrow in two weeks on the purchase of a new home in Mesa.

When we told the seller of the Mesa home about our problem, the seller was very nice and agreed to give us a 60-day extension to close. Our real estate agent said that we should be able to sell our Peoria home during this 60-day extension period. The buyer of our Peoria home, however, is demanding the return of his $5,000 earnest money. He says that, if we don’t agree to refund his $5,000 earnest money, he will delay any sale of our Peoria home to a new buyer by filing a lis pendens. What is a lis pendens? Although we know that we are being blackmailed, should we agree to refund this $5,000 earnest money?

  Answer: No. If the only reason that the buyer is not buying your Peoria home is “buyer’s remorse,” you should be able to cancel the purchase contract after the buyer failed to close on the scheduled closing date. The title company then should pay the $5,000 earnest money to you.

  Note: A lis pendens means that there is a pending lawsuit regarding who is entitled to the ownership of the home. The buyer of your Peoria home could file a lawsuit, and record a lis pendens, only if the buyer had a claim for specific performance of the purchase contract to buy the home. The buyer does not, however, because the buyer no longer wants the home. Therefore, the recording of a lis pendens would be wrongful. Under A.R.S § 33-420(A), the buyer could then be liable to you for a $5,000 penalty, plus your attorney’s fees, for wrongfully recording this lis pendens.