Should buyer get deposit back? WWYD?

[the kabuki]

Need some unbiased opinions and/or legal advice. We had a home for sale, had 2 buyers that both offered full price. One couldn't offer a deposit (they were getting the zero down interest only loan) the other had $5000 for a deposit. Accepted the 2nd buyer with the deposit. Only request was that we wait an additional 2 weeks past the customary 30 days to close, as she needed to close on her home first. The contract had nothing in it stating that our sale was contingent upon her home closing, she just requested the extra time, and I accepted. This was back on August 17th. Closing ended up being scheduled for Oct 12th.

The day before the closing, she informs me that the buyers' of her home are giving her some problems and could we delay the closing until next week? Not a problem. Well, this drags on for another month until finally she calls to tell me her deal is dead. Which means that she's unable to purchase my home. Oh, and could she have her deposit back? I've been waiting three months for this closing and lost the first buyer. Not only that, we've gone from prime selling time (before school starts) to the absolute worst time of year to sell (right before the holidays)

Now, there is nothing in the contract regarding the sale of her home, the only possible "out" was if she was unable to obtain financing/mortgage, which was not the case here, she had financing.

For three months I've had the expense of paying the utilities (A/C and heat, hey it's Michigan , we use both in the same day around here!), electric, lawn service every week, watering the new sod ($600 water bill ), property taxes , association dues, ,loan interest payments, and winterizing the sprinklers. Not only that but she also ordered laundry cabinets for $800 which I put on my account in order to get her a better price for them. Now I have to have them installed by the finish carpenter for another couple hundred $.

I honestly do feel bad for her, I realize this wasn't her fault, she had already ordered custom made blinds, had a mailbox installed, had her boxes packed and was ready to move when this happened. But all in all, I've lost not only the first buyer, but any other potential buyers while this was off the market for 3 months, and the bills for this time period equal more than her $5000 deposit, which is I why I don't feel obligated to give it back.

Am I in the wrong here? The phone conversation with her about this didn't go over too well, basically ended up as "I'll see you in court".

 

[Alicnwondrln]

wow thats a tough one
i dont know much about it
but with all the work you put in for her and the $ youve spent i dont know if i would give back the deposit as you now have to start at square one all over again

good luck

 

[NJBlackBerry]

Get their deposit back? NO WAY. I hope you have a good real estate lawyer. Our lawyers would never have allowed the transaction to drag on this long.

 

[the kabuki]

It's just that it's already been such a long time, with so much money already paid out by me. If it had been a week or two and she backed out, I would've had no problem returning the deposit, but three months later??? In this market???

 

[KeepSwimming]

I agree....sounds to me like you went out of your way to accomodate her. Life happens...yadda yadda....and you did everything you could to help her out.

Follow your instincts, and do NOT refund the deposit.

 

[the kabuki]

Get their deposit back? NO WAY. I hope you have a good real estate lawyer. Our lawyers would never have allowed the transaction to drag on this long.

Never had need of one till now. Guess that's on my list of things to do tomorrow. Which is another thing, who knows how much this will end up costing me in the end? Ugh!!

I wouldn't have minded the extra wait if the closing actually took place!!
It's the fact that I did wait and I'm back to square one again

 

[Beth76]

If it's "up to you", no way should you give back the deposit. If there are legalities involved you may not have a choice. But, from what you described it sounds like you're in the right. She backed out on the contract. I wouldn't feel sorry for her at all. She royally screwed you over. I hope you can get it resolved peacefully.

 

[NJBlackBerry]

A Real Estate transaction is probably the biggest financial deal in people's lives. Didn't you have a lawyer review the contract? I am surprised. Don't let this go on any longer. You tried to do the right thing and got taken for a ride!

 

[the kabuki]

A Real Estate transaction is probably the biggest financial deal in people's lives. Didn't you have a lawyer review the contract? I am surprised. Don't let this go on any longer. You tried to do the right thing and got taken for a ride!

The contracts we use were originally written up by a lawyer. I basically just need to fill in purchase amounts, dates of closing, warranty info, etc. From there, they go straight to the title company, who handles the closing. If a buyer wants a lawyer to look over their contract, I have no problem with that. Unbeliveable as it sounds, never once in the past 15 years in all of our closings have I had one homeowner hire a lawyer to review it though.

There's not much for me to do at this point. I have her money, if she feels she's entitled to it back, well then, I guess I'll need to contact a lawyer if she takes me to court.

 

[Rafiki Rafiki Rafiki]

You're right about not being obligated to refund her money. But what would you do if you were the buyer?

I know she's probably in a horrible place, and I suspect that if she had a buyer, she'd still want your house. What are the possibilities of your refunding a portion of her money for the costs you were out on the deal? You may not ever have to look at her again, but will you be able to look yourself in the face every morning for taking advantage of the fact that she didn't write her contingency in your contract?

Believe it or not, I have been on the mortgage lending side of this type of transaction and written denial letters for people who would have been borderline on paying two mortgages. There's probably a good chance that if you don't strike some sort of deal with her, the mortgage company she was working with will come back on her side and write the denial letter.

I think you'll be better served by dealing with her in a good way so that it doesn't come back to haunt you.

It may not be all bad in the end--if you had two full-price offers, you might be able to increase your asking price when you list it again!

 

[the kabuki]

You're right about not being obligated to refund her money. But what would you do if you were the buyer?

I know she's probably in a horrible place, and I suspect that if she had a buyer, she'd still want your house. What are the possibilities of your refunding a portion of her money for the costs you were out on the deal? You may not ever have to look at her again, but will you be able to look yourself in the face every morning for taking advantage of the fact that she didn't write her contingency in your contract?

Believe it or not, I have been on the mortgage lending side of this type of transaction and written denial letters for people who would have been borderline on paying two mortgages. There's probably a good chance that if you don't strike some sort of deal with her, the mortgage company she was working with will come back on her side and write the denial letter.

I think you'll be better served by dealing with her in a good way so that it doesn't come back to haunt you.

It may not be all bad in the end--if you had two full-price offers, you might be able to increase your asking price when you list it again!

She did have financing though, we were set to close the next day. Had her offer been contingent upon her home selling, then I would not have accepted it to begin with and would have went with the first buyer.

As for the costs I've incurred, in the 3 months that this has dragged on, my actual costs are more than the $5000 deposit. Like I stated previously, she ordered extra cabinets, I've paid loan interest, lawn maintenance, all utitlities, $600 water bill, sprinkler winterization, fall clean-up, along with a $4,000 property tax bill that I was not expecting to have to pay since the home should have been closed by now.

You're correct about her being in a bad place, she's in the middle of a divorce and is trying to sell a $700,000+ home, which in our area could take years to sell. She had said that she would've still wanted the house if she sold hers, but I honestly don't see it selling anytime soon.

She's not the only one in a bad place though, this whole area is seeing some pretty hard economic times. Houses aren't moving at all like they were a few years ago, and this home has already been for sale for almost a year. I don't see us being able to ask more, matter of fact we've actually lowered the price considering what time of year it is and the economy in this area. As DH's job is tied to the building industry also, times are shaky for us too. Which is why, although I do feel for her, in the end I have to look out for my family and our finacial situation first.

 

[nomie74]

It seems pretty simple, with a deposit you have a certain amount of time to cancel and get your money back and if not then you're out the money. If your house was already on the market for a year its not like you can just turn around and sell to another buyer tomorrow. You have to look after the best interests of your family.

 

[golfgal]

You are not obligated to return the earnest money if she backs out of the contract for something that isn't a contingency in the contract. If the contract had stated that the sale was contingent upon the sale of her house then you would have to return the money, since the contract was not, then the money is yours to keep. People ask for earnest money to protect themselves in cases just like these!

 

[Lisa loves Pooh]

No you don't have to give her the deposit back.

The purpose of the deposit is for cases such as this.

A friend of mine who does real estate (for fun!) has had deals fall through and the deposit helps them to maintain the home (mortgage payment/insurance/utilities) while it is for sale (it is not their residence).

The loss of the deposit is her problem--we're not talking a courtesy hold on a car--this is a home for goodness sakes. I wonder if she gave the deposit back on her broken deal--and if she did...she was goofy for doing so. (unless it was a stipulation in the contract--even then, seller beware when you include that!)

 

[phorsenuf]

Did you use a real estate agent to sell your home? Did she have one representing her? If so, they will handle everything and if the contract does not state selling her home was contingent on the buying of yours, then no, she is not entitled to her deposit back.
However, I'd go through that contract with a fine toothed comb to find anything else that may give her a way out.
What was in there about the home inspection? Was there a clause about what would happen if the closing did not take place in a resonable amount of time after the agreed upon date? Are you sure she was approved for the financing on your home without the sale of the other? What are the terms of that? Did you have a prequalification letter from her prior that spelled everything out?
There are all kinds of things to consider than just a sentance in a contract giving an out.
Even though people for some reason do not like using real estate agents, this is a prime example as to why you should. A reputable agent would never have even let this go on as long as it has. Just because she had the deposit over the 0% down people doesn't always make the best buyer. It's not all that easy to do a 0% down loan and truthfully, they would have been the better buyers.

Yes, I used to be in real etate.....LOL

P.S. reading this may sound harsh, I don't mean it that way at all, just trying to help, but sometimes words on a screen don't sound as nice as in person.

 

[Feralpeg]

I had a similar situation happent a few years ago. I had a buyer who put down $1000 deposit ($5000 deposit seems huge to me). The buyer didn't have a home. They lived in an apartment. I also had another buyer, but there was a two contingency deal with them. They needed to sell their house and they had a buyer who need to sell their house. So, I went for the buyer in the apartment. I was a week from close. Everything in my house was packed. I'd arranged for all of the utilities to be changed over. I'd sent change of address notices, etc. I get a call from the buyer's agent saying they had changed their minds. The agent was very apologetic, but said they didn't even tell him why. In Missouri, a title company actually holds the deposit in escrow. I called the title company to ask them to turn over the deposit to me. They said they couldn't do that without written permission from the buyer. The buyer refused. My agent basically left me high and dry. She told me to go to small claims court. I finally called the buyer's agent and told them that I was going to take them to court. The agent asked me to hold off while he talked to the buyer. He told them they didn't have a leg to stand on, so they finally turned the money over to me.

Good luck!

 

[chris1gill]

You've lost a LOT more than 5,000.00 by waiting on this... as you point out, you were in prime selling season & now you likely will not sell until April when the market heats back up so to speak... no way would I give the deposit back. You've likely lost double that deposit in the end....

 

[eeyore kelly]

I would not return the deposit.

 

[Cyndirella]

If there is nothing in the contract stating that the sale is contingent upon the sale of her house, the deposit is yours. That is a huge mistake on her part to not include a contingency clause.

 

[Rafiki Rafiki Rafiki]

She did have financing though, we were set to close the next day. Had her offer been contingent upon her home selling, then I would not have accepted it to begin with and would have went with the first buyer.

As for the costs I've incurred, in the 3 months that this has dragged on, my actual costs are more than the $5000 deposit. Like I stated previously, she ordered extra cabinets, I've paid loan interest, lawn maintenance, all utitlities, $600 water bill, sprinkler winterization, fall clean-up, along with a $4,000 property tax bill that I was not expecting to have to pay since the home should have been closed by now.

You're correct about her being in a bad place, she's in the middle of a divorce and is trying to sell a $700,000+ home, which in our area could take years to sell. She had said that she would've still wanted the house if she sold hers, but I honestly don't see it selling anytime soon.

She's not the only one in a bad place though, this whole area is seeing some pretty hard economic times. Houses aren't moving at all like they were a few years ago, and this home has already been for sale for almost a year. I don't see us being able to ask more, matter of fact we've actually lowered the price considering what time of year it is and the economy in this area. As DH's job is tied to the building industry also, times are shaky for us too. Which is why, although I do feel for her, in the end I have to look out for my family and our finacial situation first.

I guess you've answered your own question about what you're going to do.

Just one more point about that financing being in order: unless she is just rolling in money or someone gave her that $700K house with no mortgage on it, her bank approval likely had an approval contingent on the closing of her current home. It's customary to write a mortgage approval in that way, and it's very likely that her bank would have halted the closing of the new mortgage when they did a final review of the closing papers. Don't be surprised if the bank goes back and does something like this.

Did you pay for cabinets she wanted in the house? Why would you do that before having her money?