Good stuff from Wendy!!!
In the last few months, I have had three incidents of buyers defaulting on purchasing my listings. In each case there was an earnest money deposit held in escrow at a title company.
Case #1: Buyer defaulted because he said he did not want to own three properties.
Case #2: Buyer defaulted because he wanted to pay $10,000 less than the contract price the day before closing.
Case #3: Buyer defaulted because he found a new home he wanted to buy instead of my listing.
There was no provision in any of the contracts that stated, “Buyer may decide to cancel the contract at any time for any reason with no penalty".
In the first two cases, the buyers’ agents told me they informed their buyers they would probably lose their deposit. It was clear that there was no contingency allowing the buyer to walk away, and the buyers knew that.
In Case #3, however, the buyer’s agent became an advocate and
demanded the buyer’s deposit back. He knew my seller was contacting an attorney, as he had called the buyers directly to inform them. The agent stated that although the buyers did not want to complete the purchase, they were worried about my seller’s legal intentions. He said they could dig for another provision and get back their deposit later. He defended them and asked what we could do to resolve the matter. I told him I was not an attorney, and would not argue back. You see, I don’t mind negotiating price and terms for the sale of real estate...
But I certainly don’t negotiate about someone’s legal rights in keeping deposits.Do you?
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Is she sure there is no clause that reads 'buyer may cancel at any time for whatever reason'?!
Thanks for the re-blog; I missed this one!
x
Bryant and Debe - I have had buyer's agents try to insert a similar clause, believe it or not!
I always counsel the buyer that once the deposit goes into escrow it may be a challenge to get it back unless they use a legitimate contingency to get out of the deal. Even so I have been involved in several escrow disputes that went on for months. I had one back in the Spring with a bank REO where the bank didn't close as scheduled due to title issues and the buyer decided to walk away instead of extend. It took 4 months to get the money back.
The problem is that all parties have to sign a Rider releasing the earnest money either to the buyer or the seller. I've heard of sellers not wanting to sign it even when the buyer didn't qualify for a loan, but in the end they did when the contract was explained to them again.
Many years ago I did have a buyer (on my listing) walk away and signed the form and the earnest money was kept by the seller (actually the brokerage and seller split it). That buyer felt so guilty he didn't fight it (it was only $1,500 on a condo priced around $100,000 or less). Haven't had the problem since but don't look forward to it, although we use attorneys here so I would defer any problems to the attorney.
Dear Listing Agent,
I can't believe that you'all won't give my buyer 30 to 40 days to not close. (I though the star's weren't aligned was a good reason not to close), I really don't care about earning a commission I just do this for sight seeing tours, really it's only 30 to 40 days your seller's have to keep their home off of the market. And now you want to keep the earnest money deposit. It was onlly 30 to 40 days. Boy how can a little ole buyer get any where these days.
The nerve of Listing Agents.