Should buyer get deposit back? WWYD?

[disykat]

I can't believe anyone would think you needed to give the money back. When I've purchased homes it has been made very clear to me that my Ernest money goes to the buyer regardless unless the house doesn't meet inspection etc. If your end of the deal kept up, the money is yours. If that wasn't the case, then Ernest money would just be a joke - what meaning does it have if you can just back out and get it back?

I'm no expert, but I don't think she has a legal leg to stand on. I suppose if you wanted to be "nice" you could offer to return her deposit after she has paid the expenses you incurred by extending her. I'm sure once she figured out they added up to more than her deposit...

 

[drakethib]

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".

I am quite sure if you calculate all "soft cost" that you incurred during the 3 month period, I believe that they will well exceed over 5K if not double that amount.

To ask for a deposit back after 3 months is unacceptable IMHO.

 

[phorsenuf]

Not that I have anything against agents, most are very good at what they do, but I am curious at this point what could an agent have done differently? I don't think it's a matter of letting things slip on by. Our deal was not contignent on her home selling, so legally one had nothing to do with the other. I've used agents in the past and the only time they ever received any info regarding the buyers' current home sale is when our offer is contingent upon their home selling first.We don't have the laws about property contingencies like they do in Texas. I personally spoke with her mortgage officer ( a local office) and financing was all set. Again, not to be snippy, just wondering what I could've have done differently.

In the contract it states- "If a firm commitment for mortgage cannot be obtained within 20 calendar days from the date of Acceptance, at Sellers' option, (upon written notice) this agreement can be declared null and void and deposit shall be returned. If Purchaser is rejected for the mortgage, Purchaser shall furnish the Seller with the lenders' written verification of mortgage denial. Upon Seller's receipt of such denial this agreement shall become null and void and the deposit shall be returned to Purchaser"

Did you have a prequalification letter from her before making the deal? Did she provide you with anything in writing after the 20 days? I ask because if you had one it probably would say in there about the other house selling first.
Also, as soon as she asked for the additional 2 weeks to close so she could close would have immediatly raised a red flag about the whole deal. An agent would neve had let it go for as long as it had. Did she have an agent representing her?

I see what you are saying though regarding her mortgage being dependent upon the money from the sale of her home. That is the one thing that sticks out in my mind, and yet according to the wording of the contract, wouldn't she had to have notified me within 20 days?

One thing that I wonder about this though is since you agreed to push back the closing a few times so she could close on her other house (and possibly) be meeting the terms for her new mortgage is you have now agreed to forgo that part of the contract because essentialy you have now changed the terms by allowing her to extend past that time by allowing her more time to close on her house. Does that make sense what I am trying to say?

The whole situation really stinks and I agree that you should keep the money. Legally however there may be a loophole. Hard to tell because of the financing part.

Has she contacted you back yet about it? I really do hope you are able to keep it. You certainly deserve it after all that!

 

[chrissyk]

Maybe not, but I wouldn't be surprised. I've received contracts so poorly written, that I wouldn't submit them to my seller until they were corrected.

These agents are thrown out there with no training, other than textbook information and leave their buyers wide open for trouble.

If it was a FSBO - well, this is one reason right here why they're so iffy to get involved in. A good set of agents never would have let this slip by them.

A good LAWYER would have been even better. Agents wouldn't have let it go because they wouldn't have wanted to wait months on end to get their commission. A lawyer would have been able to clarify the law to the buyers, which might have helped to speed things along much earlier.

FWIW, we only sell FSBO, and we've never had an issue because we always make sure to have an excellent real estate attorney on board from the beginning. In terms of cost, we have always paid a flat fee for the attorney (the last one was $500 for the entire transaction I think). My sis has sold FSBO 3 times, and she paid an hourly fee to her attorney once for some reason. He was EXCELLENT, though, so he was worth it.

As for the original question...no way, this buyer should NOT get that deposit back. It will mitigate some of the damages that the seller has incurred in terms of maintenance, upkeep, and lost selling time.

 

[chrissyk]

YES! Especially in a case like this! That addendum or provision would have been the buyer's agent responsibility. Buyer's don't even pay the buyer's agent commission! It's a free service to them!

for real estate agents! Good ones anyway...

This is not always true. We just sold a house FSBO, and the buyer definitely paid his agent's commission. We built that extra 3% in when we put the house on the MLS and offered a 3% agent's commission.

 

[phorsenuf]

This is not always true. We just sold a house FSBO, and the buyer definitely paid his agent's commission. We built that extra 3% in when we put the house on the MLS and offered a 3% agent's commission.

So you paid the commission, not the buyer.

 

[chrissyk]

So you paid the commission, not the buyer.

No. We priced the house 3% higher once we added in the 3% realtor commission. If a buyer had come to us directly, s/he would have gotten the house for 3% less. The buyer definitely paid the commission in this case, albeit indirectly because it was built in to the price that we were prepared to accept from a buyer with a realtor.

BTW, we bought our 1st house with a buyer-only broker representing us...I now wonder if the same thing happened to us. It probably did. I didn't know a whole lot about real estate commissions at that point, though.

 

[SqueakyMouse]

What's the point of her giving you a deposit if she can get it back if she changes her mind about the deal?

 

[Am_I_There_Yet]

A good LAWYER would have been even better. Agents wouldn't have let it go because they wouldn't have wanted to wait months on end to get their commission. A lawyer would have been able to clarify the law to the buyers, which might have helped to speed things along much earlier.

I think in states where lawyers handle real estate transactions, people are more likely to use them. We use title companies in Texas and it's very rare for someone to consult an attorney until there are problems. At least this is what I've seen since I've been in the industry. YMMV.

 

[Am_I_There_Yet]

This is not always true. We just sold a house FSBO, and the buyer definitely paid his agent's commission. We built that extra 3% in when we put the house on the MLS and offered a 3% agent's commission.

State to state things are going to vary. My experiences are of course going to be about Houston and the market I work in.

The only time I've ever seen a buyer pay an agent's commission here, is when they get burned by the buyer's rep agreement. They sign up with an agent and go buy a new home straight from a developer, cutting the agent out of the deal, would be a good instance.

We are in a HUGE buyer's market here. In states where they are in a better market, you hear of buyer's paying commission. You also hear of it at times, when dealing with a buyer who already has an agent, but finds a FSBO who isn't willing to pay the 3% buyer's agent commission. Again, they've signed a buyer's rep agreement. The agent could sue for procuring cause otherwise.

It's so slow here, that sellers are not only routinely paying commisson, but are offering bonuses to the selling agent on top of the commission.

 

[Am_I_There_Yet]

No. We priced the house 3% higher once we added in the 3% realtor commission. If a buyer had come to us directly, s/he would have gotten the house for 3% less. The buyer definitely paid the commission in this case, albeit indirectly because it was built in to the price that we were prepared to accept from a buyer with a realtor.

BTW, we bought our 1st house with a buyer-only broker representing us...I now wonder if the same thing happened to us. It probably did. I didn't know a whole lot about real estate commissions at that point, though.

Homes can't be sold for more than market value. Even if you added that 3% in the price, the house still had to appraise. In your instance, the market value must have been higher than what the buyer paid, but adding that 3% into the price isn't always going to work. You could very well have a deal bust by doing that.

(You could also be in one of those crazy California-like markets where people are getting into multiple-offer bidding wars. You sure as heck don't see that here! You don't even see multiple offers!)

When I list a house, I always do a net sheet for my seller, and of course commission is added in there as part of their closing costs. BUT, the homes list price comes from the market analysis, not based off of what they'll net. It makes absolutely no difference what they add into the price. If other comparable homes haven't sold for the price they'd like to get in the past six months, theirs won't be able to either.

Not everyone is in a position to sell and usually it's because of commission. That's the reason for the majority of FSBOs in my area.

Again - speaking of my area and our market.

Okay - I've gone off-track enough. I need to be out there selling real estate instead of sitting at my computer talking about it!

 

[the kabuki]

Did you have a prequalification letter from her before making the deal? Did she provide you with anything in writing after the 20 days? I ask because if you had one it probably would say in there about the other house selling first.
Also, as soon as she asked for the additional 2 weeks to close so she could close would have immediatly raised a red flag about the whole deal. An agent would neve had let it go for as long as it had. Did she have an agent representing her

No I did not have a prequalification letter. I spoke directly with the lending officer (local office) and was told financing wasn't a problem. No she did not provide anything in writing within 20 days. In the 20 days, the title work was already being drawn up, along with her lending information, so at that point she was obviously qualified and hadn't been denied for a mortgage.

She had a listing agent on her home, and her buyers' also had one. No agents were involved in our transaction.
Yes, I was concerned about the delay. Closing was scheduled for a Thurs. she asked for it to take place the next week. Didn't think it was a huge problem waiting an extra week. I mean, in this market I wasn't about to turn away a buyer just for a couple of extra days.

A good LAWYER would have been even better. Agents wouldn't have let it go because they wouldn't have wanted to wait months on end to get their commission. A lawyer would have been able to clarify the law to the buyers, which might have helped to speed things along much earlier.

Funny but I wasn't real worried about the delay until I heard that the lawyers' were getting involved. That's when I really started to worry
Even then, I wasn't going to risk losing the deal in this market when there seemed a strong possibility that the lawyers, agents and brokers' on both sides would be able to work out her deal. Of course, it dragged on in small increments. I would contact her and would hear that there's a meeting set in 3 days, so 3 days later would find out that her buyer's plan on submitting another offer, couple more days, then she would counter that, few more days...pretty soon another month has gone by and then the deal just died.

We use title companies in Texas and it's very rare for someone to consult an attorney until there are problems. At least this is what I've seen since I've been in the industry.

Yes, it's pretty much the same around here. Not one time in all the homes we've sold has a lawyer been used by the buyer. Only time I used one is to write up the original contracts years back. Of course after this, I see some items that will need to be added to those.

One thing that I wonder about this though is since you agreed to push back the closing a few times so she could close on her other house (and possibly) be meeting the terms for her new mortgage is you have now agreed to forgo that part of the contract because essentialy you have now changed the terms by allowing her to extend past that time by allowing her more time to close on her house. Does that make sense what I am trying to say?

Yes, makes total sense, it was exactly what I was thinking too. The other that has me concerned is that now that her home didn't sell, she doesn't have the money for the downpayment, so she can't get the mortgage, does that now mean that she is denied for a mortgage? So she can come back at this late date with a denial letter? Seems like a bit of a loophole, but one for a judge to decide I guess if it comes to it. That's what keeps lawyers in business. And also where a prequalification letter would be good to have.

And yet, even with the letter, if a situation changes i.e. she no longer has enough for a downpayment, how would the prequ. letter even make a difference? The situation has changed and now she's denied. So not even sure it would matter in this instance if I had one or not.

Guess a contract should state that buyer must supply either an acceptance or denial from the lender in _____(blank) days. That way a person couldn't come back two months later and say that they've now been denied so give me my deposit back. And yet, what if someone gets laid off, or has some accident and they can't work and it happens after the time of acceptance of financing? Obviously if you have no income, then a lender won't give you a mortgage, and it's not like you can actually "force" someone to buy your house. Which is where I guess having a deposit would come in

Has she contacted you back yet about it?

No, haven't heard back yet. She told me to be expecting papers soon though.

 

[chrissyk]

Homes can't be sold for more than market value. Even if you added that 3% in the price, the house still had to appraise. In your instance, the market value must have been higher than what the buyer paid, but adding that 3% into the price isn't always going to work. You could very well have a deal bust by doing that.

(You could also be in one of those crazy California-like markets where people are getting into multiple-offer bidding wars. You sure as heck don't see that here! You don't even see multiple offers!)

In our case, it was a cash deal so no appraisal That was nice! I agree with you that if it had had to appraise out, it wouldn't have. It was a pretty nutty market when we sold, and the buyer was really desperate to close the deal. We closed in under 2 weeks, and he would have closed sooner if we could have gotten the title company to move faster It was definitely a weird transaction.

 

[chrissyk]

I think in states where lawyers handle real estate transactions, people are more likely to use them. We use title companies in Texas and it's very rare for someone to consult an attorney until there are problems. At least this is what I've seen since I've been in the industry. YMMV.

This is very true. I've sold FSBO in a state where lawyers handle everything, and in a title company state. Both times, we had a lawyer involved, though. Maybe it's just paranoia on our part, but better safe than sorry, KWIM? Most of the time, you're probably just paying the lawyer for peace of mind in the title company states. However, in the instances where something does go wrong, the lawyer will be very valuable.

 

[Cindy's Mom]

Illinios is a title company state too; I used to be a closer at a huge title company here and never ever were there buy/sells with lawyers being present. I just can not phathom doing such a large financial transaction without a lawyer being present.

 

[the kabuki]

Illinios is a title company state too; I used to be a closer at a huge title company here and never ever were there buy/sells with lawyers being present. I just can not phathom doing such a large financial transaction without a lawyer being present.

I was reading through a forum on a legal advice site, and the same answer kept popping up..."you should have had a lawyer" and yet around here it's very rare to have a lawyer present at a closing.

 

[Am_I_There_Yet]

In our case, it was a cash deal so no appraisal That was nice! I agree with you that if it had had to appraise out, it wouldn't have. It was a pretty nutty market when we sold, and the buyer was really desperate to close the deal. We closed in under 2 weeks, and he would have closed sooner if we could have gotten the title company to move faster It was definitely a weird transaction.

I thought about it being a cash deal after I finished posting. You lucked out! The only bad thing, is since you went FSBO, it can't be used as comps for other sellers. They would have LOVED you!

 

[chrissyk]

I thought about it being a cash deal after I finished posting. You lucked out! The only bad thing, is since you went FSBO, it can't be used as comps for other sellers. They would have LOVED you!

It can't be used as a comp because it was FSBO? Wow, I didn't know that! That stinks. I wonder why not, though. I mean, a sale is a sale, right? The buyer did have an agent, too. I guess that that doesn't matter, since we were FSBO sellers though.

It was definitely an unusual transaction. I've never encountered someone who was so in a rush to close before. The entire thing was literally 2 weeks from start to finish. He had the inspection just a couple of days after making the offer, and he was chomping at the bit to close after the inspection. I still have no clue why, because this was purchased as a 2nd home. The only thing that I could figure was that he was doing a 1031 exchange

 

[Chicago526]

I just sold my condo and bought my house in August. I had an agent AND a lawyer, and a title company handles the transaction!

I would NEVER sell/buy a home without a lawyer. I'd really hessitate to do it without an agent, either. As much as I hate paying commision, it's just too important to make sure things go smoothly OR have professionals on the case if they don't. I don't know anything about real estate law and I don't WANT to know. And I'm willing to pay so I don't have to LEARN!

 

[the kabuki]

I just sold my condo and bought my house in August. I had an agent AND a lawyer, and a title company handles the transaction!

I would NEVER sell/buy a home without a lawyer. I'd really hessitate to do it without an agent, either. As much as I hate paying commision, it's just too important to make sure things go smoothly OR have professionals on the case if they don't. I don't know anything about real estate law and I don't WANT to know. And I'm willing to pay so I don't have to LEARN!

I realize that the chances of something going bad are less when using an agent and/or lawyer, but they can go bad. The buyer of our deal had an agent and a lawyer and so did her buyers' and yet the deal still went bad.