One of the most contested issues that can cause tempers to flair is a dispute over earnest deposits. You want a migraine....deal with two sides that both think they have been had!
The contract outlines how the earnest deposit can be retained and relinquished if the buyer does not follow the contract. Yet many buyers are surprised when the seller says.....I want the earnest deposit.
How does this happen?
- Simply not understanding the contract.
- Not having representation that can guide you through the contract.
- Poor representation.
- Disregard for the contract, thinking the seller would not claim the deposit.
- Contract language that requires forgiture of the earnest deposit if certain conditions are not met.
Not understanding contract is probably one of the most common reasons for losing an earnest deposit. Contract can be complex and vary from state to state. So if you live in one state and move to another it is very likely what you knew in one contract may not apply in another state. Contracts themselves can vary and if you allow yourselves to use "Store Bought" contracts you should be prepared for a mess. These contracts are vague, lose and most attorney's will have a field day....and snicker all the way to their bank with your money!
Not having proper representationto explain the contract in detail and protect your interests. If you are buying from a FSBO.....do you give the seller the deposit? Not if you are represented...the your buyer's agent holds the deposit in escrow. Do you have to give the FSBO the deposit....no you can have it held in escrow at a title company or by your attorney. Will the FSBO like it? Probably not but they will live with it.
Poor representation,hiring representation without the proper training and experience can be disastrous. There are many professional "career" Realtors who will watch out for your best interests. Protecting you from errors that could cost you your earnest deposit.
Disregard for the contracts terms and languagecan cause you to lose your deposit. I have seen pepole think they can do what ever they want and whenever they want. Wrong, if someone has strong representation and they know the contract language you could lose your deposit, plain and simple.
Additions to existing contract language can alter a contract terms setting new conditions. The most common is if the home is not purchased and closed by a certain date. This is much like an option to purchase. You offer your earnest deposit as an inducement to keep the property off the market while you sell your existing home and put a future close date in the contract. If not closed by that date you lose your earnest deposit.
There also is a cute little item called the "non-refundable deposit". I like this a lot "if" I am a seller's agent. I never allow my buyer's to do this however! You want something bad enough this looks like a way to get it...usually it is trap....and if you do not perform the contract language to the letter you lose your deposit.
Most of the time people do what they are contracted to do....but when they don't disputes arise and the remedies are they to settle disputes but usually it is a very unhappy experience for both parties.
I hope this gave you a little insight into earnest deposits.
Comments(2)