Can I Keep Flaky Homebuyer's Earnest Money?
Dear Real Estate Adviser,
I am a seller and just had a final purchase contract drawn up. Now, I'm told the buyers want to change the terms or they'll back out. I don't want to change them and I'm getting fed up with this whole thing. I've already paid the real estate attorney and paid for title work. Can I keep the earnest money?
Earnestly speaking, it's a bit hard to tell without seeing the contract or hearing specifics about those proposed changes. But if there's an issue like a major flaw unveiled by an inspection or a bank's appraisal not lining up with the sales price, then sellers can reasonably expect to get a lower offer or a request for a repair credit as a result. Sellers only get to keep the deposit if the buyers get cold feet or default in some other overt way, barring specific contract language to the contrary.
Speaking of contracts, do the buyers have a clear contingency written into the deal that gives them the latitude they're taking? It's time you examine that document closely.
It Gets Kinda Complicated
Of course, the party holding the earnest money -- typically the title company but sometimes the seller's or buyer's broker -- can't just give it to you or to the backpedaling buyer. They can release it only with the signed direction of both the seller and the buyer or by court order.
If the buyers refuse to release the money, you'd have to sue them to get it. One key to claiming earnest money is to keep a good paper or digital trail, showing documentation that you were ready to close on the contractually designated date while the buyers were not, and that you gave the buyers ample chance to "cure the breach."
Do an Aggravation Calculation
But before you start butting heads with the buyers, I'd invite you to do a little math. Calculate how much it's worth to you to not have to put the house back on the market and possibly settle for a little less money with the next buyer. Is that sum roughly the same as the cost of those new terms requested by the buyer? Though your answer would vary depending on the strength of your local housing market, the real question is: How much is this continuing headache worth to you?
If the Buyers are Totally Out of Line ...
However, if the new terms are outrageous (the buyer may be playing a similar game with other sellers), you may have to hold fort and nix the deal. Because you've kept the property off the market expressly for the buyers and are out those aforementioned fees, you would be able to make a case to keep the earnest money. If the deposit is relatively small, say $1,000 or less, the buyers may be willing to walk away without suing if you appear to have the contractual clout. Since you've already paid your real estate attorney, he or she should be able to at least advise you on which direction to go before starting the meter again.
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