I think you did the only thing you could do. Very few buyers are not going to make their offer continent on getting financing, so that's just something you have to deal with as a seller. And, the bad thing for the seller is that a financing contingency essentially gives a buyer a way out for any reason he or she wishes. Anyone can get denied for financing - just fill out the application in a way that it'll get denied. The lender won't and can't tell you why it was denied because that would be disclosing the buyer's personal financial information.

As the housing market tightens in some places, this is actually something that well-qualified, serious buyers can use to their advantage. By getting mortgage pre-approval you don't have to make your offer continent on financing. I bought my current house with an offer that was $2500 less than another one the seller got because I was pre-approved and was able to make my offer not contingent on financing. Sellers know what a weasel clause the financing contingency is.

They still had their inspection contingency in place. Wouldn't that allow them to back out for pretty much any reason? I don't think an inspection has to be done by a professional.

They could walk into the house, see a drip from a tap and say "Nope, I don't want to deal with that. Cancel the contract."

Until the contingencies are waived, anything can happen.

First, I agree that $500 isn't worth the trouble to get away from this obviously unqualified buyer. Terminate the contract. If there are costs involved, it truly needs to come out of the earnest money. If not, give it back and thank your lucky stars that this didn't go any further.

And YES- ditch that Realtor, now. She's proven to be more of an advocate for the sad-sack story of the buyer than her client- you- within a "buddy" relationship with another Realtor. Yuk. Terminate that agreement right now, as well, and get another Realtor who will actually fight for you. Easy to do, within this situation.

Like has been said before, there was not much the OPs agent could do if the financing contingency was still in place, so accusing the OPs agent of not performing miracles is probably just emotional, poor advice.

Maybe that BUYER's agent should cough up the $500 - or whoever it was who wrote up an offer in bad faith - without knowing where the $$$ was coming from. Can you request to get offers with pre approval documentation?

Guys, contracts are written with both parties knowing that the other party has a way to terminate w/o being in default. This is the only thing that happened here. Nothing more, nothing less. The buyer exercised her financing contingency when her financial situation changed to the point where her lender would not offer financing.

For those of you that say the seller's agent should have done something to get the deposit returned to the seller, what, in detail are you speaking of?

"With respect, this house is selling for $86,000, it may not be worth getting an attorney involved."

With respect, a house selling for 86,000 may not be alot of money to you; however, it may be to others. I stand by my thoughts to engage a lawyer to protect one's legal interests. Realtors are not lawyers.

I stand by my thoughts to engage a lawyer to protect one's legal interests. Realtors are not lawyers.

And I stand by my thoughts. Please tell me how the OP would have been helped by spending money for an attorney this time.

Let's take a look at just that.

• Let's say the attorney was really cheap and would do this for $400 (remember purchase offers have an expiration date so time is of the essence).
• So the OP would have spent $400 to better understand the offer and rewrite it.
• Any rewrite would be a rejection of the original offer and a counter-offer, so the OP would be losing the ability to accept the original purchase agreement.
• We already know from the other thread that the buyers wouldn't budge at all on price so they may just resubmit their original offer.
• The contract would still have an inspection contingency because that is not going away.
• The contract would have a financing contingency because that isn't going away either.
• The buyer would have exercised the financing contingency and the offer would have fallen through anyway.
• The OP would be out $400 and have nothing more to show for it.
• Do this a few times and should be able to spend all your moving money.

I am not saying that $86,000 isn't a lot of money, nor did I imply that, I am saying that dropping a few hundred dollars on an attorney is a bigger chunk of $86,000 than it is of $860,000.

Who said that having a lawyer explain it to the OP means that they have legal representation for the entire transaction.

And, like Bry911 pointed out earlier, if you want a deal to start off on the wrong foot, just submit an offer that has been written up by an over zealous, over protecting attorney. It may sound like the way to go in practice, but in reality, all it does is to cause the two parties to negotiate the contract and not the deal at hand. That is, if the other party will even counter back. Like Bry911 says, he would not even counter such an offer. And I am speaking from experience... I once had a know it all buyer from Jersey who was investing here in Charlotte. He insisted that we use "his" contract and after about five unsuccessful attempts at getting sellers to agree upon a deal, he realized that real estate is indeed local, right down to the customary paperwork.

ncrealeatateguy- Your comment is hyperbolic, as is bry911.

Goodness- There are at least two sides of every single RE transaction- sales (which you are expert in) and legal-within you are, frankly- not.

I'm hoping you can recall me as one who advocates for a Realtor to help a buyer/seller through process,

But "negotiate a deal" is a chasm away from negotiating a contract that is legally protective. The former is a sales agreement, the latter a legal agreement..

You may think of yourself as an expert, and from what I've seen of you- in your salesperson expertise- definitely are. But you are not a legal expert.

Honestly- can you give true, legal expert advice to clients, in the event that legal issues happen? In a way that that will be legally binding?

Really-speak the truth.

902, it does not take an attorney to read a financing contingency to be able to advise a client if they are entitled to a deposit, especially if one has been facilitating RE transactions for a while and has seen the same scenario over and over. RE is not rocket science nor is RE law.

And you know the answer to your last question... I am not legally able to practice law. But it is expected of me from my clients to know contract and RE law to the point that I can advise them enough to help them male a decision if they need an attorney.

ncrealestateguy--NO- you are not legal. But you will certainly work hard for your commission. C.mon- you are a salesperson. You "know" the contract like other salespeople, but not like a lawyer- And then, in the event that things actually do need legal advice, what do you do?

Lol- you tell your clients that you're "not a lawyer", and advise them to get one.

Honestly, kind of makes me sick, as most of your clients have absolutely no idea that if push comes to legal shove, you'll be...Shoot, I don't know- away...

Honestly- can you give true, legal expert advice to clients, in the event that legal issues happen? In a way that that will be legally binding?

I don't know what qualifies one as a "legal expert." I mean my J.D. is from a pretty good law school and I am still far from a legal expert. I will elaborate on my non-expert opinion. There are times when an attorney is necessary, I wouldn't consider signing a construction contract without getting expert review, however, there is so much consumer protection and case law around real estate that for most transactions the standard purchase contract (which has certainly been written by an attorney to cover typical situations) is sufficient. Having said that, there will be cases and times when a legal expert would be helpful so you have to make the value judgement on your own.

In this case, you really have to ask yourself what additional protections is an attorney going to provide and are those protections worth the cost. If someone were to call me up about this particular situation I would ask the client if they felt there was something they had done wrong that they were wanting protection from.

In the real world, there isn't any protection for this seller at all, whether contractual or otherwise. I mean, seriously, get real! The buyer found a way to finance the purchase of the home without having to sell her trailer because she found someone to rent it to, who apparently stopped paying rent when they lost their job...

The buyer is very likely judgement proof, there is maybe a 1 in 1,000 chance of actually recovering your attorney fees if this went to court, and no real chance of meaningful recovery. An iron-clad contract is only as good as the efforts you will take to enforce it. In this case, you are not going to spend the chunk of cash required to sue for breach of contract and specifically not for anything that isn't covered in the standard purchase contract.

Disclaimer - This is my interpretation of the law and probable outcomes rather than specific legal advice.

Every realtor I've ever worked with to sell a house has warned me that in practice the earnest money ends up back with the buyer if they back out. This is because of the finance and inspection contingencies. Fortunately I've never had a buyer back out but it seems like at least in my area realtors are very careful to manage seller expectations about earnest money.

bry911- didn't realize you are a qualified legal expert. Interesting, in that you already have legal expertise going into any transaction. :) This particular transaction, at this point, doesn't make financial sense to get a lawyer after the fact. You can see my comment, above, where I agree.

I still say that spending a few hundred bucks in the beginning for legal advice is a good thing. My RE attorney is a great one. Her philosophy is that she's there to insure full understanding of her clients, provide clarity when needed and to ward off potential issues from the beginning. For the most part, I don't need her in straightforward transactions. But I've had a couple that were a bit more complicated, and she's been there to explain things and advise. Main emphasis is to avoid trouble, not start it, and it's served me well.

A bit off the subject, but the one place that she's gotten very involved was in a contract with a builder. The standard building contract in TX is written by the TX Builder's Association. Not surprisingly, most of he language is to protect the builder. So yes- the document "morphed" a great deal to add protections for us, the homeowners that simply aren't contained in the standard contract.

^^^902 Juanita, it is the same here in S Florida. The builder contracts I have seen are 100% oriented toward protecting the builder and not the consumer. It only costs a few hundred dollars for an attorney to review the builder contract before signing. Yet, getting a buyer to agree to spend the money for their own protection can be difficult. Our regular real estate contracts for resale are much more consumer friendly, nothing like builder contracts.

As to the OP, don't stress. There is another buyer for your home. You may need to get another agent as your current agent sounds like she is either new to the business or hasn't learned from past mistakes. If she had checked with the lender prior to submitting your offer, it is very possible she would have uncovered the tenuous position of the buyer. Maybe not, but most of us check the qualifications of the buyer to limit false starts like this one.

Denita,

What would you have asked the buyer's lender in this instance if you were the listing agent?

The lesson here is to require more than $500 before signing a contract with any potential buyer. If they can't come up with at least $1000 they aren't serious.

I usually ask the normal questions of the LO: Have you received and verified documentation from the buyer for their credit report, assets, paystubs, and tax returns? This is after I have received a copy of the "pre-approval". If the pre-approval is worded differently (like Wells Fargo won't admit if they have seen documentation or not), then I ask the LO how far along the buyer is in the process. Some LO's will provide DTI info, others won't. None will give personal financial info out but the conversation with the LO will be illuminating.

Most agents in my area have a short list of LO's/lenders that have a reputation for issuing pre-approvals and then not being able to follow through with closing. If a pre-approval comes in from one of those lenders, it is an automatic red flag. If there is doubt, we ask the selling agent to have their buyer follow up with a trusted lender for qualifications. In fact, in many of the listings in the broker notes, the seller won't review the offer until the buyer has been screened with the trusted lender. The buyer doesn't have to use the lender, just get screened by them. Too many LO's are untrained today and will issue a pre-approval without review of the buyers' docs which is what creates these types of issues: weak buyers making offers. This is an issue for the buyer too. If they knew they couldn't complete the purchase, a sensible buyer wouldn't waste their time making an offer. It works to everyone's benefit.

dbrad is correct. A $500 deposit is not enough to take the home off the market in my area. Most of the time, even for first time homebuyers, we are looking for a min of $2500 EMD unless the house is more than $300k or cash, then we are looking for a much larger deposit (10% min for cash and $10k min to start).

bry911- didn't realize you are a qualified legal expert. Interesting, in that you already have legal expertise going into any transaction.

It also should be noted that I ALWAYS use the purchase contract supplied by my realtor.

Denita, until you mentioned the possibility of a "lazy lender", I struggled with how the heck this offer was ever accepted in the first place. YIKES. Not nearly the whole of it, but lazy /"wink and a nod" lending contributed to the residential RE crash we just went through. Too many loans written that were basically junk, too few homeowners who were invested enough in their properties to have an incentive to ride out the big dips.

YIKES, again. I fear for a lot of markets, again...

The LO situation is much worse today than it was pre-crash IMO/IME. The big box banks and lenders like Quicken decided to not use trained LO's at all. They are using 'application takers' that have no idea what their own lenders guidelines are and have no idea how to qualify a loan. The buyers info in those types of situations isn't even reviewed until it gets to underwriting. This usually means that at least 2 or 3 weeks is wasted by the buyer/the seller/lost market time. That's why, as agents, we have to spot those phony pre-approvals at the front end. It's not the buyer's fault - because they don't know. It is 100% on the lender and their attempt to save money by not hiring or training loan officers.

There are plenty of good lenders out there that do have excellent, knowledgeable LO's. Just not in big box banks (for the most part). IMO the banks should have to disclose that their LO's aren't trained with the lenders guidelines and that their guidelines are typically more restrictive than Fannie or Freddie or even government loans. Some lenders have opted to do only a token amount of government insured loans (read FHA/VA) and if you are going for one of those loans it is unlikely to be issued even if the buyer qualifies because they have reached their quota. Look up Chase and what they are now doing rather than FHA loans (for one example).

Assuming it is a standard purchase agreement you are still going to sign the thing, of course, now you're a little poorer and a little better educated, but it isn't likely to add anything other than friction to the transaction and further vest the seller into the deal.

I continue to be confused about why you assume that being educated re: what you are signing will cause friction. Unless you announce to "the other side" that you're seeking legal advice, who knows about it? I really don't get it.

A true story- We once sold a home with a rent-back provision written into the sales agreement. Seemed very up-front, and the buyers agreed. Whew- we sold so much faster than we'd ever imagined, they wanted the home enough to wait out the 6 months we needed to get on our way. No big deal, right?

Our attorney advised us that sure, this is standard, well written- but really pay attention to your docs, at closing. Huh. Wouldn't you know it? As we read through the docs at closing (not provided ahead of time, to us), standard language was included "no rent back provision". Because we'd been advised to really take care on the one thing we were unaccustomed to, we stopped the closing, until the language in the closing docs matched the sales agreement. In the sales contract, our rent-back was to go to sellers upon close of escrow.

Our Realtor, who represented us well during the sale, was a bit miffed. He couldn't see why we wouldn't just sign and "trust" the sales agreement, even though the legally binding agreement was in opposition of the sales doc.

Our attorney knew enough to get us to pay attention, and we were saved any confusion. Had we signed the docs presented, the buyers could have kicked us out at any time, and we would have had little recourse. And frankly, the buyer's mother (a CPA and attorney) was on the other side of the table, so to speak. She agreed with us, advised her son to wait a bit for his "turn" at the table, and we all had coffee while waiting for the changes. Done deal in about an hour, and both buyer and seller were completely comfortable.

You bet. Legal advice on legal transactions is smart. You are not "poorer" for the education, on things you're unsure of. You're simply better informed, better protected.

JuanIta -

Again, you are doing exactly what I advise people not to do. Can you point to where the OP said something about a rent-back provision. My analysis was based on these facts, not a different purchases agreement. I don't like one size fits all legal advice. My advice is in no way general legal advice, it is specific to this and all nearly identical situations.

I always advise people to see an attorney for a rent-back provision because it does create a whole lot of problems and probably should be written in favor of the party offering the convenience.

bry911- Threads "morph". It happens. Sorry you don't care for my comment, but it was fairly on-point to our discussion. No- not everybody just blindly signs standard agreements (as you state), and yes, legal advice can help ward off trouble before it ever presents. Germane to the topic at hand, even though the situations are different.

Perhaps if the OP had somebody other than a salesperson ( interested obviously more in a commission than her client) advising on the main pitfalls of transactions from the beginning, she would have never have accepted that shaky, crappy "offer" in the first place. Certainly wouldn't be seeking advice from strangers. That's my bottom line point.

But, you have yet to provide detailed example of the OP's situation that the seller's agent, or an attorney could have done to get the deposit returned to the seller. Or examples of how the seller's agent or an attorney would have known that the offer was shaky and crappy.

Even a $1000 deposit would not have changed any of the outcomes.

Of course not, as I detailed several posts up. I'm in no way trying to provide what you suggest, but I am advocating for seeking a bit of legal advice- especially for the uninitiated or "one-off" situation. Perhaps read for content. If you're bored with it, perhaps it's time to stop your participation in this one. Eh- we all get there.

Hi R S,

In a nutshell: ...going forward when issues at any point in the selling of your property arise you should/could directly involve your real estate agent's broker.

Since you are in a listing agreement, please involve the broker (your real estate agent's boss) if you have any other questions or mishaps or "information that is glossed over" or what-have-you that you feel is not being addressed correctly.

All it takes to involve the broker is calling the real estate office and asking to speak with the broker.

The Real Estate Broker is there to help... and they will help! Sadly it is NOT unusual for whatever reason, that real estate agents fly by the seat of their pants during transactions and need a bit of guidance.

There is no harm or foul to ask or consult with the broker directly if you are having issues going forward, they have skin in the game, because he/she represents you, too.

Good luck!

Sorry I had to step out for a bit. I was going to note that legal advice isn't one size fits all. A seemingly small change in circumstances may lead to different advice.

The legal advice that you are currently advocating for is, "read your contract." Are you saying but for legal advice you would have signed the contract without reading it?

Always carefully read real estate contracts before signing and ask questions when you find things you aren't comfortable with.

Since we are telling true stories here. Thirteen months ago I bought a house near my new job. The sellers wanted an August close but I had an incredible rate that was going to expire so I offered a May close with a very favorable rent-back. We wrote a full lease, as we should, and it was rock solid. Four hours before closing they announced that they were out and we could inspect.

The closing attorney wanted to know what I wanted to do with the security deposit at the closing. I released it, I felt it wasn't worth the trouble of getting into a landlord/tenant dispute and the attorney who wrote the addendum and the lease agreed. In the end, all that protection did nothing because I wasn't willing to expend the money and effort to enforce it.

they wanted the home enough to wait out the 6 months we needed to get on our way. No big deal, right?

Our attorney advised us that sure, this is standard, well written- but really pay attention to your docs, at closing. Huh. Wouldn't you know it? As we read through the docs at closing (not provided ahead of time, to us), standard language was included "no rent back provision".

Just to pour some salt into this particular wound...I am not sure this is great legal advice... In most states a "rent back provision" is only good for 30 days. In no state is it recommended for 6 months. It is completely insufficient to protect either party after 30 days. The contract should have included the language "no rent back provision," and a separate lease should have been signed.

In the state I currently reside in and my previous state any rent back addendum would be voided by operation of law after 30 days. At which point you would have had a month to month tenancy with no protection at all for either party.

Note, if the property is financed as a primary residence the maximum period allowed for the buyer to take possession is 60 days after closing. Not 61 days or later. To have a longer "rent back" you would have to have different financing for the purchase - investor financing. This does not apply if you have owned a property and occupied it and then decided to rent it out. It applies for financing a owner occupied property that you are purchasing. So, in addition to checking your state's statutes, check with your lender.

Denita, in the transaction I detailed, Mom paid cash on behalf of the son. He financed her out after we left. And yes- we signed a short term rental agreement, funds paid up front out of escrow. She was a smart woman with a lot of cash who advised her son all the way. Actually was very friendly with me, as well. Frankly, I think they wanted the pool!

Would have been a bit bumpy, however, had we left the closing docs as is

I guess I am confused if you had a separate rental agreement then that isn't a rent-back and should be marked no rent-back in the closing docs. Unless you were going to rent-back for a short amount of time while you negotiated a more permanent rental agreement.

A rental agreement would establish a landlord tenant relationship outside of the closing, you can, of course, write the purchase contract contingent on successful negotiation of a rental agreement, so everything could be done at closing but I still don't see the use of having a rent-back clause in the closing paperwork in addition to a rental agreement.

ETA: Although not really accurate it may help to think of a rent-back as delayed possession of a residence and a rental agreement as immediate possession of investment property.

Dbrad- we have only put $500.00 down at each of our home purchases on the advice of our realtors. Both homes closed just fine. If the money will be returned to the buyer in most situations it doesn't matter if it is $500.00 or 10,000, what matters is the preAPPROVAL and if there are known issues with the lender leaving buyers at the alter.

Anyone can have an emergency and a larger REFUNDABLE deposit will not change that.

I suppose like most things in RE, the earnest deposit amount is regional as well. But in a decently busy market I would think twice before taking my house off the market for a $500 deposit.

Has to be regional. I haven't seen a $500 EMD since the 1980's in my area.

Sometimes is just isn't worth the trouble. Let the original offer go and immediately move forward to achieving your goal. As a seller, don't ever consider earnest money to be yours. There is a reason why it's held in a trust account pending closing. It's not yours. There are a lot things that have to happen before that money becomes yours.

In theory, the larger the earnest money deposit, the greater the motivation of the buyer to complete the transaction. The reality is the earnest money is usually returned to the buyer.

The prudent thing for this seller is to get rid of this contract asap and get the house back on the market. After all, that was the original goal -- selling the property.

If you weren't satisfied with the performance of your agent in the process, you may want to replace them with someone who will do a better job. This is a conversation you may want to have with the agent's broker (boss). Most agent's don't want to keep listings with unhappy sellers. They are too much trouble.

Get that house back on the market and move forward.

My turn to step out for a bit- I had to remind myself of why the "no rent-back" clause was wrong for us. Structure of the agreement- we did have a rent back for the first two months, the other 4 were covered by a short-term rental agreement. It was a while ago, so I can't remember why the sales agreement was structured as such, nevertheless it was.

I'll admit I didn't read all the posts here, but something is fishy. The buyer's tenant stopped paying rent and this was "unforeseen" by the buyer... but the buyer just signed the contract last week? At most only one rent payment would have been missed, right, if the missed rent happened after the offer? I think your realtor isn't being straight with you. Your realtor definitely isn't bringing you qualified buyers if the buyer can't afford an inspection and one missed rental payment is breaking the bank. (Not sure what it costs to rent a trailer, but a buyer should have more than that for a down payment, yes?)

Like others have said - ditch the buyer and the realtor.

When the buyer got pre qualified, the lender used the buyer's investment property as an asset when computing her debt / income ratio. As soon as she had no tenant, and therefore no income producing asset, the lender computes it as a liability, which in this case put her debt to income ratio out of the guidelines.

Haven't read all the replies, but let's say the contract is contingent on a home inspection. The buyer could still have a "home inspection" and then walk away. Or does it say that the home inspection is to be done by a licensed inspector, who charges so-and-so much. Even if she hires a proper inspector, s/he may charge less than the earnest money.

Second, does the contract say, contingent on home financing? If yes, she can walk.

I'd say return the money and move on.

I don't think most contracts spell out who is going to do the inspection - mine never have - so you can have a friend do it if they have expertise in that area.

Where the contingency comes into play is when you present the seller with a list of real or imagined deficiencies of the house and say, "Fix this stuff or else I'm not buying this dump." If the seller agrees to everything the buyer wants, then the inspection contingency wouldn't let the buyer off the hook. But every time you go back and forth, if someone says "no," the deal is off. So if the buyer asks for $12,000 in renovations and the seller tries to compromise at $11,500, the buyer can say no and walk.

I don't know if the buyer can simply say after the inspection that he/she simply no longer wants the house no matter what the seller does to fix it. Maybe if there's a health or safety issue, or something that just couldn't be fixed.

kenjwy- My contracts, as a buyer, have always contained a contingency based upon inspection, unless it's a total "as is" teardown. . A certain amount of days to inspect, accept or adjust.

And it's not always about "fix this or else I'm not buying". In my experience, it's often led, though, to new adjustments, as in "lowering the contract price based on X" (if it rises to the occasion) or even escrowed-in funds at closing contributed by the seller to take care of issues, without lowering the sales price.

Right, the negotiation can include price adjustment in lieu of repair, etc., but my question is whether or not the buyer can simply walk as a result of an inspection. As in, not giving the seller any chance to fix it, just "I don't want it anymore."

It's never come up in any deal I've been involved in, but just curious.

Yes. The buyer can walk.

Yes, because that defect cannot be fixed to my satisfaction, or there are just too many issues, or....

Yes, jn3344, I agree. In our standard "AS IS with right to inspect" P&S agreements the buyer can cancel any time during the inspection period for any reason - or even no reason. This is completely different from just being able to cancel due to a failure of a specific item in the inspection report. I don't know if OP's "inspection clause" is similar or not because the contract wasn't posted. But it is one of those important regional distinctions written into the contract. We are all blind here to the OP's specific contract - except for the seller, the buyer and their respective agents. Hopefully by now she has moved on to get a better buyer.

my question is whether or not the buyer can simply walk as a result of an inspection.

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It really depends on the wording of the contingency. In many competitive real estate markets they will put a cost of repair clause in the contingency. This puts a cap on repairs before renegotiation and ties the hands of buyer and seller.

Seller has to make repairs below the cap and buyer must allow repairs below the cap.

902 Juanita, it is the same here in S Florida. The builder contracts I have seen are 100% oriented toward protecting the builder and not the consumer. It only costs a few hundred dollars for an attorney to review the builder contract before signing. Yet, getting a buyer to agree to spend the money for their own protection can be difficult. Our regular real estate contracts for resale are much more consumer friendly, nothing like builder contracts.

We are building in SW FL. My DH is a retired general counsel for a major corporation with a specialty in contracts, patents and trademarks.

Even he was smart enough to realize that what he didn't know could hurt us. The first thing we did when we decided to build was to hire a RE attorney who is schooled in new builds. Sure glad we did with some of the headaches we've had.