Posted by ken in sc on April 25, 2000 at 11:10:01:
Because it makes the sellers feel like they have a deal. What I mean is by all this is that we have a contract in writing that we both agree on. I just don’t give them any earnest money. If they insist, I will deposit it with my attorney who will close. But they never insist. What I am really saying is that I would never sue on the contract, so I don’t care if it is legally binding or not. Before closing, the most I will have spent is $100 - $200 on title search and maybe an inspection. Not much to lose. We sign a contract and I act in good faith and most of the time it closes. I think if you tried to do business without a contract the seller would not think it is a “real deal”. Also, just 'cause a contract is not “legaly binding” doesn’t mean you can’t close on it. I do it all the time. I just don’t like to wind up like you with someone having $1,000 earnest money that I can’t get back, that’s all.
I made an offer on the house, posted earnest money with the title company. Decided not to buy the house. The contract had plenty of weasel clauses, but the title company refused to return the earnest money, without the WRITTEN consent of the seller. This particular situation resolved itself ( I managed to stop pay on the check before it cleared, and some other measures were taken)
My question is this: How can you avoid this…
I have thought of having the seller sign something (notorized) that advises the title company to make a return of the earnest money , if not closed by____________ or some other stipulation. This would be given to the title company at the time of giving the sales contract to the title company.
Any other ideas on this?
Thanks, Wilton
Re: Better yet, give no earnest money. - Posted by ken in sc
Posted by ken in sc on April 21, 2000 at 07:37:47:
When buying from individuals who do not have their property listed with a Realtor, I just don’t give any earnest money to anyone. I will give them references if they ask, but typically they don’t. My contract does not have any line in it about earnest money, so it’s not like they see a blank not filled in. Besides, typically I buy quickly after my inspections so I have just not had a problem with this. If you are one of those investors who gets a property under contract and then tries to have a long time before closing to resell, then I can see where they may want some earnest money. But if you are a real buyer in that you will buy when satisfied with the condition/inspections, then just don’t give them any earnest money. Try it, it works!
Good luck, Ken
There is a form for a release of deposit that any real estate office will have. Once the seller signs that, you get your money back. If the seller does not sign it, then the deposit is in dispute, at which point you basically have to contact an attorney. If it’s a listed property, in some states an agent can represent you in this matter, but if things go this far, I would personally get an attorney. In fact, I just recently came very close to such a situation. Luckily, the seller capitulated and gave me my money back when the house did not meet my approval of the home inspection. It’s a good thing they did too, because my threat of suing them and adding court costs and attorney’s fees to the bill was not a bluff. Some people just can’t be reasoned with.
Ken,
Your post was excellent. In my opinion, the most important part of your post, was the part about using or ammending) a contract so that there is no line for
deposit. Most for sale by owner’s have no clue what they’re doing anyway, so I imagine most would never even know to ask. One thing that did just cross my mind though & I don’t know the answer - perhaps someone else does - that question is do you need to have anything in your contract that refers to earnest money deposit in order to make that contract legally binding??? If so, I’m sure you could just have a clause that states no ernest money is being put up.
Would like to hear from those in the know about the legality of having an ernest money clause in contract vs. not having one at all.
Vic
Is a contract without earnest money legally binding? - Posted by ken in sc
Posted by ken in sc on April 24, 2000 at 08:12:26:
Probably not. But, would you ever sue someone to make them sell to you. Probably not as well. I can see you in front of the judge saying, “I signed a contract to buy this house for $30K under market, and now he wants out! No fair!” The judge would side with the seller for sure.
In the real world, most sellers are honest people and you are honestly helping them while making money at the same time. Typically when I sell the people are happy with me and we both look forward to closing. I would never sue for “specific performance” to get them to sell. I would just find another deal.