Earnest Money Deposit - Buyer Wants to back out. A Question

[jfenn1980]

I live in Philadelphia and listed my home for sale. The buyer made an offer, which I accepted. She walked through the home prior to and during the inspection. I gave her an initial run through of what the house needed--windows, rugs and roofing work. I put all that I had said in the disclosure agreement, and the buyer came to the house again during the inspection. Buyer wanted to have the structure inspected as well as mold and radon tests. The report shows little of significance that I did not know to disclose, such as that the chimney needs to be rebuilt. But otherwise, no great problems. Doors and windows need caulking, some plates need to be added to junction boxes, and one of the electrical breakers need to be updated. Stuff like that. The insurance company inquired about my quitclaim deed, suggesting that my mothers estate needed to be opened and a new deed filed and inheritance tax paid. I called the register of wills and was informed that not only is this not required, but that this is not possible based on my deed. The house was given to me a year prior to my mother's death and is not in her estate. (I have been living on the property for three years). The next day I was informed by my realtor that the buyer wants to back out of the sale based on something in the inspection but no word as to what. Am I obligated to sign anything to return the deposit money, and if I do not sign anything, what happens? My realtor seems adamant that I do not have any option here to keep the money, but it doesn't seem clear to me as to why. It turns out the woman is an investor, and I feel (just feel) that the deposit money might have been laid down as a retainer so that she could acquire an estimate on what needed to be done with my property before committing to the sale. Thoughts?

 

[Taxing Matters]

My thoughts are that your right to retain the earnest money depends greatly on exactly what the purchase agreement says. As I've not read it I cannot tell you under what circumstances you may keep it. If you aren't certain of your broker's recommendation on this then the next step is to take the agreement to a lawyer who practices property law for a review of it.

 

[quincy]

If the purchase agreement included a contingency (e.g., sale contingent on financing or inspection or whatever), the purchase agreement can be canceled without penalty to the purchaser if the conditions for purchase cannot be met (e.g., unable to finance, unsatisfactory inspection, whatever). The purchaser would be entitled to a return of the earnest money deposits (absent any agreement on the deposit to the contrary).

 

[BuyLowSellHigh]

If you are using the standard ASR form it gives the buyer the option to terminate the agreement if they are unsatisfied with the inspection.

But ask your realtor to go through the agreement with you and explain it. If you are able to get another buyer and sign the form again at least next time your should understand what the agreement means. You are already paying your realtor to represent you so use them.

 

[adjusterjack]

The next day I was informed by my realtor that the buyer wants to back out of the sale based on something in the inspection but no word as to what. Am I obligated to sign anything to return the deposit money, and if I do not sign anything, what happens?

Read your purchase contract and thoroughly understand the inspection contingency.

Cancellation of the purchase generally requires a written notice with cause. And maybe an option for you to cure the item objected to.

Here's an example of part of an inspection contingency that takes up more than a page of my own purchase contract:

Buyer Disapproval: lf Buyer, in Buyer's sole discretion, disapproves of items as allowed herein, Buyer shall deliver to Seller a signed notice of the items disapproved and state in the notice that Buyer elects to either:

(1) lmediately cancel this Contract, in which case:

(a) lf Buyer's notice specifies disapproval of items as allowed hereln, the Earnest Money shall be released to Buyer.

(b) lf Buyer's notice fails to specify items disapproved as allowed herein, the cancellation will remain in effect but Buyer has failed to comply with a provision of this Contract and Seller may deliver to Buyer a cure notice as required by Section 7a. lf Buyer fails to cure their non-compliance within three (3) days after delivery of such notice, Buyer shall be in breach and Seller shall be entitled to the Earnest Money. lf, prior to expiration of the Cure Period, Buyer delivers notice specifying items disapproved as allowed herein, Buyer shall be entitled to a return of the Earnest Money.

OR

(2) Provide Seller an opportunity to correct the items disapproved, in which case:

(a)Seller shall respond in writing within five(5) days delivery to Seller of Buyer's notice of items
disapproved. Seller's failure to respond to Buyer in writing within the specified time period shall conclusively be deemed Seller's refusal to correct any of the items disapproved.

(b) lf Seller agrees in writing to correct items disapproved, Seller shall correct the items, complete any repairs in a
workmanlike manner and deliver any paid receipts evidencing the corrections and repairs to Buyer three (3) days
days prior to COE Date.

(c) lf Seller is unwilling or unable to correct any of the items disapproved, Buyer may cancel this Contract within five (5) days after delivery of Seller's response or after expiration of the time for Seller's response, whichever occurs first, and the Earnest Money shall be released to Buyer. lf Buyer does not cancel this Contract within the five (5) days as provided, Buyer shall close escrow without correction of those items that Seller has not agreed in writing to correct.

285. VERBAL DISCUSSIONS WILL NOT EXTEND THESE TIME PERIODS. Only a written agreement signed by both parties will extend response times or cancellation rights.

BUYER'S FAILURE TO GIVE NOTICE OF DISAPPROVAL OF ITEMS OR CANCELLATION OF THIS CONTRACT WITHIN THE SPECIFIED TIME PERIOD SHALL CONCLUSIVELY BE DEEMED BUYER'S ELECTION TO PROCEED WITH THE TRANSACTION WITHOUT CORRECTION OF ANY DISAPPROVED ITEMS.

If your contract is similar to that then you aren't obligated to sign or return anything until the buyer complies with the contractual provisions.

 

[quincy]

If you are using the standard ASR form it gives the buyer the option to terminate the agreement if they are unsatisfied with the inspection.

But ask your realtor to go through the agreement with you and explain it. If you are able to get another buyer and sign the form again at least next time your should understand what the agreement means. You are already paying your realtor to represent you so use them.

Here is a link to the standard purchase agreement form used in Pennsylvania:
https://www.parealtor.org/wp-content/uploads/2018/04/ASR-BW-2018.pdf
See point 13, Inspection Contingency, termination of agreement.

 

[mike_miller]

@ jfenn1980 . A seller cannot force a buyer to close the contract .If your contract contained contingencies that allowed the buyer to cancel the contract under certain circumstances then you are entitled to return the deposit.

 

[quincy]

@ jfenn1980 . A seller cannot force a buyer to close the contract .If your contract contained contingencies that allowed the buyer to cancel the contract under certain circumstances then you are entitled to return the deposit.

Incorrect. There are times when a seller (or a buyer) can force the sale.

 

[Just Blue]

Incorrect. There are times when a seller (or a buyer) can force the sale.