Why Can't I Keep The Deposit?
I am selling a house and the closing date was supposed to be a month ago. They have requested an additional two weeks to get a mortgage. The contract says once they have received a commitment letter and are unable to close we are entitled to the deposit ($10K). My lawyer says if I keep it I will end up in litigation. Is this this true? Any suggestions? :-x
It is likely that they will sue you to get their 10k back. You'll be paying your lawyer big bucks to go to court
You'll have to decide what you want to do. I'd lean towards giving them their 2 weeks unless you have a backup buyer to close.
it is in you best interest to give them two weeks, because it will cost you about 1ok to fight them in court to keep the money. It really isn't worth it.
In my RE contract, there is some wording about if the buyer hasn't closed or received a loan committment by the date planned, then they have to send written notice of when they plan to close,etc. the seller then responds if this is adequate or if other arrangements need to be made. So, in your response, you would say either 1) immediate payment is required within 48 hours or whatever or the escrow money would be taken (not a good idea), or 2) closing in 2 weeks is fine, except $XXX will be added to the purchase price based on market interest rate x purchase price / 52 x 2. Depending on the purchase price, this could be a nominal amount, but it is justified based on your extended holding period.
just a thought.
Thank everyone for there input. I like the idea of increasing the price due to additional holding costs, but I didn't quite understand the formula to use. Can you please dumb it down and explain to me?
Thanks.
I also like the idea of rasing the price. I should have mentioned that to you.
Don't worry about any formula. Has an apprasial been done? Just know you can't go over that.
I'd try to get 1-2% more
There's no buyer default unless the buyer gets a mortgage and fails to close. Absent provisions in the contract to the contrary, the buyer gets back the down money unless there's a buyer default.
Contact their mortgage company and find out why there's a delay in issuing a loan commitment and if and when the mortgage company will issue the loan. If you're satisfied with the answers the mortgage company gives you, get an addendum to the contract signed, extending the mortgage commitment date and closing date.
I wouldn't recommend charging the buyers a fee. It appears that the contract is dead on its face since the time for closing has expired. In other words, the buyer can walk and so can you. However, if you want to sell the house for the price that buyer agreed to, it would seem to be in your best interests to try to keep the deal alive.
you can try and get more money is escrow.
It appears, then, that the earnest money deposit benefits only the buyer. I.e., he can cause the property to be taken off the market while he decides if he wants it. The seller is just.........'out of luck' ?
If this is correct, what difference does the amount of dpeosit make, e.g., $1.00 vs $5,000.00?
Quote:
On 2004-11-12 23:20, Taxivestor wrote:
It appears, then, that the earnest money deposit benefits only the buyer. I.e., he can cause the property to be taken off the market while he decides if he wants it. The seller is just.........'out of luck' ?
If this is correct, what difference does the amount of dpeosit make, e.g., $1.00 vs $5,000.00?
The purpose of the deposit is to secure the buyer's performance under the contract--to provide a "disincentive" for the buyer to default. The higher the deposit, the greater the benefit to the seller because the buyer would stand to forfeit a larger amount if he/she defaulted.
In the situation described by the original poster, it doesn't appear that the buyer has defaulted. Where the contract is contingent on the buyer getting financing, there's no default if the buyer doesn't/can't get the financing.
Nancy Chadwick-
What if there is a financing contingency- but the Buyer simply fails to seek financing? That's right- does not apply for financing and doesn't tell the Seller about this while keeping the house off the market for 30 days until the contract expires. Is the Buyer entitled to a refund of his deposit in that case?
How about if the Buyer is also a licensed realtor?
For detailed specific explanation, please look at post "Buyer never applied for a loan" posted 1/10/05.
Thanks.
bellybean,
If a contract is contingent on the buyer getting financing, but there is no provision REQUIRING the buyer to obtain a mortgage, I don't believe there's a default if the buyer doesn't apply for a mortgage. If the buyer has a mortgage contingency, the buyer has the option, not the requirement of making the purchase contingent on getting the mortgage--it doesn't mean the buyer MUST apply for a mortgage, unless the contract says the buyer must apply.
Suppose a buyer had a contingency for a home inspection but chose not to have the inspection. Does that mean the buyer defaulted? I don't think so. The fact that the buyer is a RE agent doesn't of itself change the picture, so long as the agent made the disclosures required by the licensing laws of his/her licensed status.
Nancy
mejo,
What purchase and sale agreement are you using? If it is the standard realtors form for your area, what box is checked? The one that says the sale is contingent upon the buyer's ability to get financing or the one that says "no contingenices"? In Georgia I believe the standard contract says that the buyer must apply for a loan within a certain time period. As long as they can prove they applied for a loan, they are in the clear.
They obviously have applied for a loan. If the offer is contingent upon them getting financing and they haven't been able to get it (or it has been delayed), I believe you are at the buyer's mercy.
JohnCl
The point of getting a large escrow is in the event you have to get a lawyer you can still walk away with some money. If a agent is holding the deposit it goes through EDO through the state if a title company is holdin it I would recommend trying to settle saying you will release 1/2 anhd get a release signed. If you are extending the closing do at least one of the following 1. get a larger deposit 2. get more money for the property 3 get a addendum signed stating failure to sign this addendum does not change any terms of the contract. buyer and seller agree to extend the closing till *********. Buyer agrees seller is entilled to $********** escrow deposit if buyer failes to preform before *********** with no release needed. This addendum does not change any other terms of the contract. Of couse check with the escrow agent and see if the addendum would be acceptable. This has been effective for me in the past.
What I have done is sign the extension, but state in the extension that the earnest deposit is to be released to you immediately and non-refundable. Has worked every time for me.
Quote:
On 2005-01-10 08:30, NancyChadwick wrote:
bellybean,
If a contract is contingent on the buyer getting financing, but there is no provision REQUIRING the buyer to obtain a mortgage, I don't believe there's a default if the buyer doesn't apply for a mortgage. If the buyer has a mortgage contingency, the buyer has the option, not the requirement of making the purchase contingent on getting the mortgage--it doesn't mean the buyer MUST apply for a mortgage, unless the contract says the buyer must apply.
Suppose a buyer had a contingency for a home inspection but chose not to have the inspection. Does that mean the buyer defaulted? I don't think so. The fact that the buyer is a RE agent doesn't of itself change the picture, so long as the agent made the disclosures required by the licensing laws of his/her licensed status.
Nancy
Nancy-
If the contract is contingent on financing and the Buyer does not seek financing- then that is a default- UNLESS the Buyer can close with cash by the closing date. Yes, the Buyer would not be REQUIRED to seek financing, as long as he can still close without seeking financing- i.e. cash. You can't agree to buy someone's house contingent on obtaining a loan- and then not try to obtain a loan- and as a result not close. That's clearly breach of contract.
It's not the same as the option to have an inspection and choosing not to get an inspection.
If they decide they don't need financing, then they need to close without financing.
The fact that the Buyer is a realtor is very much pertinent as ammunition to the Seller in a claim for the deposit because realtors are held to a higher standard. They know the process and time periods involved in obtaining financing and satisfying conditions of a loan approval and they know what 'time is of the essence' means. They've also agreed, by proof of their licensure, to deal honestly, fairly, and ethically. They also have to answer to their broker and their licensing authority when they act in bad faith and intentionally breach a contract. It definitely helps the Seller's case regarding forfeiture of the deposit, when the Buyer is a realtor.