Real Estate Deposits. Everything you need to know!
There will be time when the lawyer for the seller will request holding the deposit and as long as the funds go into the trust account with the lawyer there is no problem. This might be the norm in a private sale. The seller feels secure allowing his lawyer to manage the deposit
What happens if you don’t complete your Real Estate transaction?
First of all, is there a reason why the transaction can’t close. ie: you can’t get financing due to your own credit or possible the value of the property is not supported. The home inspection reveals deficiencies beyond what the buyer is willing to accept and the seller is willing to correct.
Zoning that is not correctly represented in the Offer to Purchase can cause conditions not to be removed. In any event, its normal that if conditions are not all removed by the date set to do so, the deposit is returned to the buyer, with out interest or penalty once the General Release is signed by all parties.
If the buyer removes all conditions to the Offer and then decides for any reason not to close at the end of the transaction, the deposit can and often is tied up for long periods while damages are decided by the lawyers for the buyer and seller and sometimes even by the courts.
It is unusual for this to happen but when it does, it can create sheer havoc with the seller who has likely bought another home and must complete his own purchase. Imagine if the first in a line of four or five sales does not close on the date set for completion and a string of sellers and buyers all dependent on their own transaction completing and you have a disaster.
In cases such as this not only will deposits be held until resolution but damages will also be awarded to those who did not complete their transaction.
Signing an Offer to Purchase is a legal and binding contract, not to be taken lightly. Avoiding some of the pitfalls behind the offer can be avoided by using professional mortgage people, home inspectors and lawyers to complete your transaction.