Your contract should have a provision for an automatic extension if buyer cannot come to closing with the funds (some give 5 extra business days, some give 10, etc). If you reach the end of that, the contract should then lay out what happens (does contract expire, etc).
You also need to read your escrow agreement, that cover the EMD and what the escrow agent will do with it under these circumstances. I had an issue in reverse a few years ago (I was the buyer and seller refused to provide good and free title by closing date and then further by end of extension period). So under the contract terms, the contract expired and we were owed the return of the EMD. However, the escrow agent, who was the title agent (who OUR agent had recommended) wouldn't release it without written consent from seller (even though escrow agreement did not have this as a requirement). We were livid, and this also gave the seller some power who then wanted to argue that he should keep it. Only after we got a separate lawyer involved did the escrow agent release the EMD. So read BOTH your contract and the escrow agreement. |
In practice sellers rarely will get the EMD. The escrow company cannot release the EMD to you without the buyers’ consent. The buyers, of course, will not consent and will claim they are still working in good faith to make the purchase. Resolving this via litigation will take at least six months, during which you cannot sell the house a different buyer. Most sellers are much better off getting home on the market again as quickly as possible rather than pursuing the EMD.
For this reason, a financing contingency waiver is meaningless for the most part. |
No. It’s the buyer’s responsibility to secure financing to close the deal, not the seller. The buyer IS holding things up. They shouldn’t have signed the contract without being sure they would be able to finance. |
Buyers that cannot get it together to get financing and foolishly committee to a purchase they cannot make with their credit/DTI are not likely to engage in a months-long litigation to get back 5-10k. True the seller also faces litigation costs so they may need to offer a settlement. But nobody in this scenario is going to court so there’s no reason (unless you are a greedy agent) to just give up on the EMD. |
The seller has options. They can return the EMD. They are not a hostage to this contract. |
You are off your entitled rocker. What on earth is the point of a deposit then? |
No, don't share anything with the realtor. They will make money when you sell it to someone else. In fact, ask them for some cash back. It's about time. |
If memory serves me correctly, the Shifty Sellers thread a few years ago had sellers who didn’t care about litigation and it was discovered they frequently had been sued over the years for all kinds of things so threatening litigation was NBD to them. I think that thread was deleted but it definitely was a cautionary tale about what crazy stuff can go wrong that you would never expect and how some people are just crazy. So it’s no guarantee in this scenario that the buyer will just say “my bad, you can keep it”. Yes, logically that’s how it is supposed to work but it never does. |
Wrong. The buyer has options. They can not enter contracts to buy things they can't afford (with financing or otherwise), or they can lose a deposit for entering into an agreement fraudulently. |
$10k is rather low; I think in this area EMD is typically at least 2%, which would be $20k on a $1m purchase. Most buyers aren’t in a position to forfeit $20k. Also the seller typically needs to get out and relist quickly, while the buyer can afford to delay. |
Only $10k? Our agent recommended $35k on a $1M house where there were several competing offers. |
You will want to relist sooner than the buyer will agree to give up their deposit. |
yes of course! there are always wackos and bad people out there. you don’t have to start out assuming that is the case, though. and if the buyers are playing games that makes it more likely OP may have to threaten litigation anyway. |
I’m a real estate attorney. You need an addendum that says
1) the settlement date is changed to xx/xx/2024 2) all contingencies are moved 3). If for any reason whatsoever the purchaser does not complete settlement by xx/xx2024 then the title company is irrevocably instructed and agrees to release the earnest money deposit without further instruction or demand of any kind whatsoever. 4) if for any reasons whatsoever the purchaser does not complete the settlement by xx/xx/2024 then seller shall have no further obligation to sell the property to purchaser and shall have the right to sell the property to a third party without recourse or liability to the seller of any kind whatsoever. Second, the holder of the deposit must sign a joiner statement agreeing to bound by #3. Third, your agent is almost definitely legally entitled to half the deposit. You need the agent to in writing release this obligation, usually in exchange for your extending the list agreement. |
I would talk to a real estate attorney. |