First, why would anyone put that much cash at risk as
earnest money for a P&S agreement?
That is insane! I usually only
give a check for $500 with any offer I write. There’s really no reason to give
more. A contract can be made legally
binding with as little as $1. That's
right, one dollar. But this couple for
some reason put down thirty-one thousand dollars! Why?
I would love to know what realtor they were working
with. Then I’d make certain that realtor
was NEVER involved with any of my transactions!
It is morally repugnant to even consider putting anyone in that kind of
position.
And the whole thing would have been easily avoided with just
a slight tweak to the wording of the contract.
The standard forms generally have a financing contingency clause. But, as we can see in this case, it is not
really strong enough if the sellers side want to be pricks about it. Typically the clause will read something like
this.
If Buyer cannot obtain financing
within 30 days Buyer must notify Seller (in writing within 30 days of the date
of this contract) of his election to cancel this contract. Failure to give
notice of cancellation within such time period constitutes waiver of this
financing contingency.
In the case of this couple they could have obtained
financing if they had listed their current house for sale. Since they were unwilling to do so the bank
refused to give them the loan. And the
court decided that was a reasonable requirement and is letting the seller keep
the deposit. This could have been
avoided by adding four powerful words to the clause:
If Buyer cannot obtain financing
SUITABLE TO THE BUYER within 30 days Buyer must notify Seller (in writing
within 30 days of the date of this contract) of his election to cancel this
contract. Failure to give notice of cancellation within such time period
constitutes waiver of this financing contingency.
That way, if the buyer does not want to sell their house and
the bank is demanding it – that offer of a loan is “not suitable to the buyer”
and the contingency remains in force.
If you just deal with the listing agent yourself, you need
to understand that they have a fiduciary responsibility TO THE SELLER. They are not your agent, they don’t work for
you. If you are not a real estate pro –
work with one! A buyer’s agent could
have steered them away from this disaster.
