How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Lucy, Esq. Your Own Question
Lucy, Esq.
Lucy, Esq., Lawyer
Category: Real Estate Law
Satisfied Customers: 29041
Experience:  JA Mentor
26798026
Type Your Real Estate Law Question Here...
Lucy, Esq. is online now
A new question is answered every 9 seconds

How is the seller protected if the contract is contingent on

This answer was rated:

How is the seller protected if the contract is contingent on financing (which could take 30 days) and the seller has packed up and readied the house for departure, and then finds out the financing didn't/can't happen. What kind of "non-refundable deposit" would be fair to be inserted in the contract?
Hi,

My name is XXXXX XXXXX I'd be happy to answer your questions today.

Usually, the seller is protected in that scenario by the earnest money that the buyer provides with the contract. What is reasonable would likely be considered based on the total contract price. If you're selling a home for $1,000,000, a $10k deposit would probably be considered reasonable. If the home is selling for $50,000, that wouldn't be reasonable. A good rule of thumb is 1% of the purchase price, but at least $500. That's fairly common and something that most buyers will agree to pay.

You may also want to consider a requirement that the buyer make "reasonable efforts" to obtain financing, so he's not just applying for one loan and then canceling.

If you have any questions or concerns about what I've written, please reply so that I may address them. It's important to me that you are 100% satisfied with the service I provide. Otherwise, please rate my service positively so that I get credit for answering your question. Thank you.
Customer: replied 3 years ago.

Thank you, XXXXX XXXXX would I insert that (in the "As Is" Florida Sales and Purchase Contract in the "Financing") ? "Earnest Money" is not mention-ed anywhere . . only deposit being deposited into escrow.


Paragraph beginning with line 94 gives me some protection, but if the appraisal comes in low, I'm stuck. Can I insert, "as long as appraisal comes in at $440K ($469K sale price)?" Buyers agent is being difficult to work with . . .

"Earnest money" is just another term for the deposit. If the contract references a deposit, it's the same thing.

A buyer likely will not agree to continue with a purchase even if the appraisal comes in 10% below the purchase price. You can make that request. But part of the protection is that, if the appraisal does come in low and they cancel, you'll get to keep the deposit.
Customer: replied 3 years ago.

So how would I word that request to buyers agent?

The wording you suggested is fine as far as conveying your intent. I'm just letting you know that the buyer may not agree.

The standard language should state in what situations the deposit is kept by the seller. That usually includes any cancellation by the buyer, including lack of funding, inspection issues, low appraisal, etc. Just check to see what it says about when you can keep it.
Customer: replied 3 years ago.

That's the problem, there is no clear cut safety clause for me. This is what I came up with: Whereas under financing, if contract is contingent on obtaining loan commitment, the seller will be entitled to a $4,000 "earnest money" non-refundable deposit (payable to seller) after 10 days of signing of contract.

That is fair and reasonable, and it addresses your concerns. Usually, though, the deposit cannot be refunded if the buyer cancels for any reason, including following the inspection. If it doesn't say that you can keep the deposit if the buyer exercises the inspection contingency, they would be allowed to just cancel under that instead of the loan contingency.
Customer: replied 3 years ago.

Then I would like to use the statement I've come up with (above) but need to know the proper place for it to be inserted into contract. Where would that be?

It's difficult to say without seeing the entire contract. Look for a clause that addresses a down payment, earnest money or other deposit. That's usually where it would go.
Customer: replied 3 years ago.

Under "additional deposit" there is a line that reads "other" with a blank line after it. Is this where it could go?

Yes, you could put it there.
Lucy, Esq. and other Real Estate Law Specialists are ready to help you

Related Real Estate Law Questions