Legal Hotline: Can I Re-List a Property if There is a Dispute Over Escrow Funds?

If a transaction falls apart and there is a dispute over the release of escrow funds, can the seller place the property back on the market and go under contract with a new buyer?

It is a best practice to fully resolve any outstanding issues with the failed transaction prior to placing the property back on market and proceeding with a subsequent purchaser.

If the situation cannot be resolved in a timely manner, the seller should always be advised to consult with their legal counsel to determine whether they are at risk of any legal liability if they move forward with a new buyer. The question becomes whether the dispute is solely over the disbursement of the escrow funds, or whether there is a dispute relating to the underlying purchase contract, as well. If it is the former, the parties should sign a release from the contract, noting that the distribution of escrow funds remains unsettled (see MAR Form #514). Entering into a new contract to purchase while there is a dispute as to the enforceability of the first contract to purchase may place the seller at significant risk of liability because they may become bound to sell one property to two different buyers.

If, after consultation with their attorney, a seller determines that it is appropriate to place the property back on the market, the escrow agent should continue to hold the disputed funds until the parties are able to come to an agreement or there is a court order directing the disbursement of the funds.

As long as a proper accounting of the funds is maintained, there is no prohibition to the escrow agent holding a deposit from a new buyer on the same property