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Question: Our house was supposed to close in several weeks but now our buyer has backed out of the deal because of personal issues. We have a $1,500 deposit and have offered to return $500. The money has been deposited with the courts and the buyers have hired an attorney. We feel $1,000 is fair compensation because we had the house off the market and lost a potential full-price offer but they want to split the deposit.
Answer: If the matter goes to court you will need to hire an attorney. You have offered $500 and they want $750 (half of $1,500). The difference is $250. You will want to retain an attorney not just because $250 is at stake but because there might be very much larger numbers involved. It may be that the potential for a bigger liability is why the buyers want a settlement and not just the superficial $250 difference between the two positions.
The purpose of a real estate deposit is to assure performance by the purchasers. As a seller you take a considerable risk when you accept a buyer’s offer, including such perils as the loss of other offers, the cost of complying with the agreement and the possibility of a price drop if the deal does not go through.
It’s entirely possible for an offer to fail without the loss of a deposit because most purchase agreements today are contingent arrangements. They say that the buyer wants to make an offer but only if certain requirements are met such as financing at or below a certain rate, a satisfactory home inspection, approval by a relative, etc. If the contingency is not met the buyer is typically entitled to the return of their full deposit.
Because real estate deals are risky sellers should seek the largest possible deposit. With a big deposit owners have more leverage if a dispute arises. For example, imagine if you had a $10,000 deposit in this situation.
Notice that the broker or other party holding the deposit has not written a check to either buyer or seller, instead they have deposited the money with a court. This is a common practice because without approval of both parties the deposit money cannot be released.
In your situation you say the agreement fell through because of personal issues with the purchaser. Does the agreement say the deposit will be returned because of such matters?
You want an attorney to read the agreement and determine the facts and circumstances involved. Once that’s done the attorney can explain the options available to you.
For instance, what does the agreement actually say? Does it give you the right to the deposit if the deal falls through, or does it also say you have a right to the deposit plus the right to sue for additional damages? Does it say that if you accept the deposit you lose the right to sue for more money?
As you’re about to see, the devil really is in the details.
Peter G. Miller is author of "The Common-Sense Mortgage," (Kindle 2016). Have a question? Please write to firstname.lastname@example.org.View Foreclosure Article Archives
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