Should I Give Up My Earnest Money

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RickBoglehead
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Re: Should I Give Up My Earnest Money

Post by RickBoglehead »

EddyB wrote: Tue May 18, 2021 9:56 am
That’s great in the states where attorney review is a part of the process (and perhaps in really unusual circumstances elsewhere), but as a seller in a hot market where attorney involvement is extremely unusual, I would tell any such buyers to discuss their proposed offer with their attorney in advance. Presenting such a contingent offer on the west coast in these times would be unproductive. In any case, the OP didn’t.
Are there states where attorney review is part of the process, i.e. required? I don't think so.

People choose to put themselves into circumstances. A large portion of real estate deals are conducted with realtors drafting agreements that people sign. Blows my mind.

Of course someone could craft an offer agreement with their attorney, and then use that agreement to make offers on properties.

It would be interesting, but of course impossible to track, how many people that participate in this craziness find themselves down the road with easily discoverable issues that a professional would have seen and identified.
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quantAndHold
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Re: Should I Give Up My Earnest Money

Post by quantAndHold »

Kookaburra wrote: Mon May 17, 2021 8:22 pm
ResearchMed wrote: Mon May 17, 2021 8:00 pm
Goal33 wrote: Mon May 17, 2021 10:11 am They can’t just take your 50k and then turnaround and sell the house for more. That’s not reality.

Find a RE with a clue.

To OP (and a few others):

Don't forget... sometimes we (OP and others) are the *sellers*.

So... how would it be if you accept an offer, one that is very attractive due to few or no contingencies, and had turned down one or possibly several otherwise "good offers"... just not quite as good, or so it seemed.
You are delighted, everything looks good, and you thus move forward with your own plans, whatever they may be.
Perhaps that includes signing on the dotted line for another property, which is fine, because you know you'll be selling this house and can easily pay off that bridge loan fast (so no worry about that unpleasant rate; it's just for a month or so, right!?). There is that nice new house to look forward to, and where *you* put down what might be much more earnest money than just $50k! After all, you KNEW that you'd be closing soon and how much risk was there in this case, eh?? :happy All is good, even though moving is SUCH a pain.
And/or there are other ways that you've moved forward with plans that can't easily - or can't inexpensively - be changed.
All is good.

Indeed, you wrote on some really wonderful financial website forum :wink: that you JUST ACCEPTED A GREAT OFFER!
YAY YOU! :beer

Ooooops.... :annoyed
Not too long before closing, that nice buyer, the folks you thought loved your house SO much (!!)... er, turns out they DON'T. :shock:
Not only are they not going to close on the house, forcing you to start the listing process over again, but *maybe* one of the other offers is still interested? Or is this market so hot that they panicked at losing out on "their dream home" and they *quickly* had an offer accepted on that next one. [Yay THEM!]
Turns out now that "nice buyer" is threatening to sue you for that earnest money... that money that's intended to partially compensate you for the aggravation and costs of needed to start the process over. Say what!? How much more will THAT cost!?
Plus, your house is now in total disarray! Packing boxes EVERYWHERE!
Packing and moving - GRRRR!

All that nice staging, pretty bedspreads borrowed from BFF but now sent back by FedEx overnight, and those lovely lace tablecloths that you've already sent off to Dear Children (who actually really DID want them - how nice was that!??). And the RE agent had absolutely insisted that you spend $X for a few <whatevers> to help with staging. If only you hadn't already paid to have them returned early...
That grand piano, already moved out (that humongous thing; hard to schedule a good piano mover; lucked out with that time slot!). Too bad; it *really* did look nice in that alcove in the Living Room! Everyone always said it 'made the house on the first impression' :happy
And those stacks and stacks of papers and books you finally are ready to finish up now that x, y, and z have *almost* been all packed up...

Where is that Xanax? Did it already get packed up too!???

:confused

RM
Let me get out my violin and play some sad music for the sellers.

Too bad that none of that is relevant in this inferno market. No one is putting that much effort into staging and prettying something up when you could leave it in disrepair and have a bidding war regardless. Seller could relist immediately and have several offers within hours.
I was a seller in this exact market. ResearchMed’s description is exactly correct. We wanted a quick sale for the best price we could get, so we did the same stuff you always do when you sell a house. We spent months fixing, painting, cleaning, to get it ready for sale. Borrowed a bunch of stuff, and moved a U-Haul load of other stuff into storage to stage it. Because it was a feeding frenzy market and there were going to be a dozen showings every day, we moved into an AirBNB while it was on the market. We got six offers, and the one we picked had $50k in earnest money and no contingencies, and had a clause saying that we got to keep the earnest money, no matter what. Beyond getting a good price, our number one criteria when evaluating the offers was to have a trouble free closing, and this offer looked good from that perspective.

Once we had an accepted offer, we started a major remodel on the house we were moving into, scheduled movers, moved all the stuff from storage back into the house (still in boxes), returned the borrowed stuff, and started packing the rest. If the buyer had backed out less than 10 days before closing, we would have had a house full of boxes, movers coming in a week, and our cars would have already been on a truck, en route to another city. It would have taken a couple of weeks and a lot of work (and money) to prepare it to be shown again, and then another week or two on the market and another 30 days to closing. We would have needed to reschedule the movers and rent a car, and the remodeling bills would have started coming in before we had the proceeds from the sale. We could have just kept the moving date and shown an empty house, but that would likely have resulted in a lower sale price.

Heck yes, we would have fought like a badger in a phone booth to keep the earnest money.
barnaclebob
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Re: Should I Give Up My Earnest Money

Post by barnaclebob »

Don't just give up your earnest money. Make them fight for it, they wont. They'll have to take you to court which will take months. All the while the property will be sitting around not able to be sold.

After the sellers initial shock wears off, offer that they keep $5000 to make up for holding costs of the house.
rascott
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Re: Should I Give Up My Earnest Money

Post by rascott »

EddyB wrote: Tue May 18, 2021 9:56 am
RickBoglehead wrote: Tue May 18, 2021 6:50 am
RelaxNoMore wrote: Sun May 16, 2021 9:33 pm We consulted a attorney last week...
We always have an attorney in place for any real estate transaction, buying or selling. If we buy, the contract states that our attorney has X days to review any signed agreement. If selling, we have the attorney prepare the contract ahead of time, or put in the same clause. While the attorney might not have put in language that would have allowed return of the earnest money in this case, he would have been notified immediately of the square footage discrepancy and then the appraisal discrepancy. As I pointed out earlier, an inspector should have noted that significant of a square footage discrepancy IMO.

As to no contingent purchases, I've commented on multiple threads that I would not participate in them under any circumstances, as a Buyer. As a Seller, if that's what the market bears, so be it. We're possibly in the market to buy a retirement home this year, and emotion isn't going to drive that decision. We may end up Selling to take advantage of the market, and then rent for a period until we find a home under acceptable conditions.
That’s great in the states where attorney review is a part of the process (and perhaps in really unusual circumstances elsewhere), but as a seller in a hot market where attorney involvement is extremely unusual, I would tell any such buyers to discuss their proposed offer with their attorney in advance. Presenting such a contingent offer on the west coast in these times would be unproductive. In any case, the OP didn’t.
+1. Some people are amazed to know that attorney review is not a common practice in many areas. I've done 100+ sides to transactions and an attorney has never been involved. It's strictly realtors and title companies in many areas.

Buyer can obviously ask for whatever... but many jurisdictions have stock purchase agreements written out by the state real estate associations. And you are just filing in the blanks. If a buyer needs an attorney to review it, that should be done prior to presenting the offer.
rascott
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Re: Should I Give Up My Earnest Money

Post by rascott »

RickBoglehead wrote: Tue May 18, 2021 10:02 am
EddyB wrote: Tue May 18, 2021 9:56 am
That’s great in the states where attorney review is a part of the process (and perhaps in really unusual circumstances elsewhere), but as a seller in a hot market where attorney involvement is extremely unusual, I would tell any such buyers to discuss their proposed offer with their attorney in advance. Presenting such a contingent offer on the west coast in these times would be unproductive. In any case, the OP didn’t.
Are there states where attorney review is part of the process, i.e. required? I don't think so.

People choose to put themselves into circumstances. A large portion of real estate deals are conducted with realtors drafting agreements that people sign. Blows my mind.

Of course someone could craft an offer agreement with their attorney, and then use that agreement to make offers on properties.

It would be interesting, but of course impossible to track, how many people that participate in this craziness find themselves down the road with easily discoverable issues that a professional would have seen and identified.

Yes some states require attorney review. Illinois is one I'm aware of.
hachiko
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Re: Should I Give Up My Earnest Money

Post by hachiko »

quantAndHold wrote: Tue May 18, 2021 10:03 am
Kookaburra wrote: Mon May 17, 2021 8:22 pm
ResearchMed wrote: Mon May 17, 2021 8:00 pm
Goal33 wrote: Mon May 17, 2021 10:11 am They can’t just take your 50k and then turnaround and sell the house for more. That’s not reality.

Find a RE with a clue.

To OP (and a few others):

Don't forget... sometimes we (OP and others) are the *sellers*.

So... how would it be if you accept an offer, one that is very attractive due to few or no contingencies, and had turned down one or possibly several otherwise "good offers"... just not quite as good, or so it seemed.
You are delighted, everything looks good, and you thus move forward with your own plans, whatever they may be.
Perhaps that includes signing on the dotted line for another property, which is fine, because you know you'll be selling this house and can easily pay off that bridge loan fast (so no worry about that unpleasant rate; it's just for a month or so, right!?). There is that nice new house to look forward to, and where *you* put down what might be much more earnest money than just $50k! After all, you KNEW that you'd be closing soon and how much risk was there in this case, eh?? :happy All is good, even though moving is SUCH a pain.
And/or there are other ways that you've moved forward with plans that can't easily - or can't inexpensively - be changed.
All is good.

Indeed, you wrote on some really wonderful financial website forum :wink: that you JUST ACCEPTED A GREAT OFFER!
YAY YOU! :beer

Ooooops.... :annoyed
Not too long before closing, that nice buyer, the folks you thought loved your house SO much (!!)... er, turns out they DON'T. :shock:
Not only are they not going to close on the house, forcing you to start the listing process over again, but *maybe* one of the other offers is still interested? Or is this market so hot that they panicked at losing out on "their dream home" and they *quickly* had an offer accepted on that next one. [Yay THEM!]
Turns out now that "nice buyer" is threatening to sue you for that earnest money... that money that's intended to partially compensate you for the aggravation and costs of needed to start the process over. Say what!? How much more will THAT cost!?
Plus, your house is now in total disarray! Packing boxes EVERYWHERE!
Packing and moving - GRRRR!

All that nice staging, pretty bedspreads borrowed from BFF but now sent back by FedEx overnight, and those lovely lace tablecloths that you've already sent off to Dear Children (who actually really DID want them - how nice was that!??). And the RE agent had absolutely insisted that you spend $X for a few <whatevers> to help with staging. If only you hadn't already paid to have them returned early...
That grand piano, already moved out (that humongous thing; hard to schedule a good piano mover; lucked out with that time slot!). Too bad; it *really* did look nice in that alcove in the Living Room! Everyone always said it 'made the house on the first impression' :happy
And those stacks and stacks of papers and books you finally are ready to finish up now that x, y, and z have *almost* been all packed up...

Where is that Xanax? Did it already get packed up too!???

:confused

RM
Let me get out my violin and play some sad music for the sellers.

Too bad that none of that is relevant in this inferno market. No one is putting that much effort into staging and prettying something up when you could leave it in disrepair and have a bidding war regardless. Seller could relist immediately and have several offers within hours.
I was a seller in this exact market. ResearchMed’s description is exactly correct. We wanted a quick sale for the best price we could get, so we did the same stuff you always do when you sell a house. We spent months fixing, painting, cleaning, to get it ready for sale. Borrowed a bunch of stuff, and moved a U-Haul load of other stuff into storage to stage it. Because it was a feeding frenzy market and there were going to be a dozen showings every day, we moved into an AirBNB while it was on the market. We got six offers, and the one we picked had $50k in earnest money and no contingencies, and had a clause saying that we got to keep the earnest money, no matter what. Beyond getting a good price, our number one criteria when evaluating the offers was to have a trouble free closing, and this offer looked good from that perspective.

Once we had an accepted offer, we started a major remodel on the house we were moving into, scheduled movers, moved all the stuff from storage back into the house (still in boxes), returned the borrowed stuff, and started packing the rest. If the buyer had backed out less than 10 days before closing, we would have had a house full of boxes, movers coming in a week, and our cars would have already been on a truck, en route to another city. It would have taken a couple of weeks and a lot of work (and money) to prepare it to be shown again, and then another week or two on the market and another 30 days to closing. We would have needed to reschedule the movers and rent a car, and the remodeling bills would have started coming in before we had the proceeds from the sale. We could have just kept the moving date and shown an empty house, but that would likely have resulted in a lower sale price.

Heck yes, we would have fought like a badger in a phone booth to keep the earnest money.
My understanding is that earnest money is never a "no matter what." There is a "no matter what" at least in many states. But that's paid directly to the seller, not into escrow. It's essentially a payment as consideration for the ability to back out of a sale. But even if you back out, the seller already has that cash.
Made money. Lost money. Learned to stop counting.
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quantAndHold
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Re: Should I Give Up My Earnest Money

Post by quantAndHold »

RickBoglehead wrote: Tue May 18, 2021 6:50 am
RelaxNoMore wrote: Sun May 16, 2021 9:33 pm We consulted a attorney last week...
We always have an attorney in place for any real estate transaction, buying or selling. If we buy, the contract states that our attorney has X days to review any signed agreement. If selling, we have the attorney prepare the contract ahead of time, or put in the same clause.
Having an attorney involved in WA is not normal. The contract is a fill in the blank, standard contract, that the buyers and sellers mark up. When we were selling in this market, if a seller had presented a nonstandard contract that they had had drawn up by their attorney, I would probably have just gone on to the next offer, because as a seller, I’m not going to go to the trouble of reading all that to figure out what’s different, much less hiring an attorney to read it, when I have five other perfectly good offers written using the standard contract.

I do question whether someone should be trying to buy a house in a market that requires large deposits and waiving all contingencies, but if one chooses to participate in that market as a buyer, to be successful, they have to play the game as it is.
EddyB
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Re: Should I Give Up My Earnest Money

Post by EddyB »

RickBoglehead wrote: Tue May 18, 2021 10:02 am
EddyB wrote: Tue May 18, 2021 9:56 am
That’s great in the states where attorney review is a part of the process (and perhaps in really unusual circumstances elsewhere), but as a seller in a hot market where attorney involvement is extremely unusual, I would tell any such buyers to discuss their proposed offer with their attorney in advance. Presenting such a contingent offer on the west coast in these times would be unproductive. In any case, the OP didn’t.
Are there states where attorney review is part of the process, i.e. required? I don't think so.

People choose to put themselves into circumstances. A large portion of real estate deals are conducted with realtors drafting agreements that people sign. Blows my mind.

Of course someone could craft an offer agreement with their attorney, and then use that agreement to make offers on properties.

It would be interesting, but of course impossible to track, how many people that participate in this craziness find themselves down the road with easily discoverable issues that a professional would have seen and identified.
Yes, many states require some degree of attorney involvement, and in several it is embedded custom (if not actually required) that the involvement extends to drafting and reviewing the contact.

Unless you mean to chastise people for choosing to “put themselves into circumstances” such as living on the west coast, your suggestion comes across as reflecting assumptions and circumstances that may very well be relevant for you, but aren’t universally (or even nationally) relevant. Attempting to be an extreme outlier in a very liquid real estate market is tantamount to saying “I won’t buy any mainstream property.”

https://www.superiornotaryservices.com/ ... ly-states/

https://www.nolo.com/legal-encyclopedia ... -play.html
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Re: Should I Give Up My Earnest Money

Post by barnaclebob »

RelaxNoMore wrote: Mon May 17, 2021 10:15 am
galawdawg wrote: Mon May 17, 2021 5:27 am IANYL but some of the advice you are getting here regarding your ability to back out of the deal and receive your earnest money back based upon an alleged "misrepresentation" of or "deception" concerning the square footage is seriously flawed.
This is most likely true. The contract had some language around buyer to verify the actual square footage. I read online somewhere it is added because there had been too many lawsuits due to the differences. But there is no “correct” way to measure the house size. 10 appraiser may have 10 different numbers. Plus, I forgot to mention this is an estate sale. Sellers know nothing about the property. They didn’t live in the property.

At the end of the day, like many of you pointed out, appraisal is only a small factor. We started doubting our decision because of the location, school, etc, before the appraisal came in.
Is the difference in sq footage due to a room thats in a converted attic? if sloped ceiling comes low to the walls the appraisal sq footage only starts counting where you have something like 5ft of height.
barnaclebob
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Re: Should I Give Up My Earnest Money

Post by barnaclebob »

hachiko wrote: Tue May 18, 2021 10:13 am My understanding is that earnest money is never a "no matter what." There is a "no matter what" at least in many states. But that's paid directly to the seller, not into escrow. It's essentially a payment as consideration for the ability to back out of a sale. But even if you back out, the seller already has that cash.
I had a friend lose a bidding war on a house because the winner cut a $50k check directly to the sellers that they could cash immediately upon accepting the offer. I dont know what the legalese was but it was effectively a "no matter what" escrow. If the language wasn't iron clad, the buyers would have at least had to fight to get the money back instead of the other way around and thats a big difference.
hachiko
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Re: Should I Give Up My Earnest Money

Post by hachiko »

Yeah, I'm not sure what it's actually called and could be different in different states (just by custom, not any legal reason - like escrow vs impound accounts). For us they called it an option fee. But, by definition, it wasn't an escrow payment.

We also lost to an all cash offer with a 5 day closing (it was basically a pretty bad house on an amazing piece of land).
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DidItMyWay
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Re: Should I Give Up My Earnest Money

Post by DidItMyWay »

lawlopez wrote: Mon May 17, 2021 11:30 pm Perhaps they will get a better offer and return the earnest money.
Was thinking the same thing. Has your realtor asked if the sellers would consider returning the $? They may have some backup offers and be nice about it. It doesn't hurt to ask.
Last edited by DidItMyWay on Tue May 18, 2021 11:42 am, edited 3 times in total.
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Kaizen Soze
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Re: Should I Give Up My Earnest Money

Post by Kaizen Soze »

barnaclebob wrote: Tue May 18, 2021 10:06 am Don't just give up your earnest money. Make them fight for it, they wont. They'll have to take you to court which will take months. All the while the property will be sitting around not able to be sold.

After the sellers initial shock wears off, offer that they keep $5000 to make up for holding costs of the house.
I loathe this suggestion. I recently sold and had a buyer do this exact thing. They backed out the day before closing and contested the earnest money immediately. They took a hard line. We hired a lawyer and settled after weeks of exchanges, receiving only $2k after legal fees. Our options were to sue them for the deposit, damages, and expenses which would have taken months and a significant amount of stress. While it seemed to be a slam dunk case, anything can happen in the courts so there's risk there as well. Or accept the settlement and move on.

It's a pretty lousy, and imo an unethical, move. You could ask or offer a reduced amount, but please don't "make them fight for it."
Hikes_With_Dogs
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Re: Should I Give Up My Earnest Money

Post by Hikes_With_Dogs »

Knowing the Seattle market, if you ever want to buy a house, you're going to have a LOT of heartache and headaches. At your income level, isn't it worth it to be "done" and move on? If you want a house, buy it. If not, good luck. Things in this area are not going to be easier or cheaper any time soon.
crossbow
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Re: Should I Give Up My Earnest Money

Post by crossbow »

Kaizen Soze wrote: Tue May 18, 2021 11:22 am
barnaclebob wrote: Tue May 18, 2021 10:06 am Don't just give up your earnest money. Make them fight for it, they wont. They'll have to take you to court which will take months. All the while the property will be sitting around not able to be sold.

After the sellers initial shock wears off, offer that they keep $5000 to make up for holding costs of the house.
I loathe this suggestion. I recently sold and had a buyer do this exact thing. They backed out the day before closing and contested the earnest money immediately. They took a hard line. We hired a lawyer and settled after weeks of exchanges, receiving only $2k after legal fees. Our options were to sue them for the deposit, damages, and expenses which would have taken months and a significant amount of stress. While it seemed to be a slam dunk case, anything can happen in the courts so there's risk there as well. Or accept the settlement and move on.

It's a pretty lousy, and imo an unethical, move. You could ask or offer a reduced amount, but please don't "make them fight for it."
Kaizen Soze, sorry this happened to you. It is an unethical move and goes against the very concept of "earnest money". Buyers should not put up earnest money if they aren't earnest enough to lose it should they have a change of heart. Same for waiving contingencies. Don't bet on what you cannot afford to lose. Asking the winner to share in your losses after you've lost is bad, but forcing their hand is worse. :thumbsdown
Kookaburra
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Re: Should I Give Up My Earnest Money

Post by Kookaburra »

crossbow wrote: Tue May 18, 2021 12:28 pm
Kaizen Soze wrote: Tue May 18, 2021 11:22 am
barnaclebob wrote: Tue May 18, 2021 10:06 am Don't just give up your earnest money. Make them fight for it, they wont. They'll have to take you to court which will take months. All the while the property will be sitting around not able to be sold.

After the sellers initial shock wears off, offer that they keep $5000 to make up for holding costs of the house.
I loathe this suggestion. I recently sold and had a buyer do this exact thing. They backed out the day before closing and contested the earnest money immediately. They took a hard line. We hired a lawyer and settled after weeks of exchanges, receiving only $2k after legal fees. Our options were to sue them for the deposit, damages, and expenses which would have taken months and a significant amount of stress. While it seemed to be a slam dunk case, anything can happen in the courts so there's risk there as well. Or accept the settlement and move on.

It's a pretty lousy, and imo an unethical, move. You could ask or offer a reduced amount, but please don't "make them fight for it."
Kaizen Soze, sorry this happened to you. It is an unethical move and goes against the very concept of "earnest money". Buyers should not put up earnest money if they aren't earnest enough to lose it should they have a change of heart. Same for waiving contingencies. Don't bet on what you cannot afford to lose. Asking the winner to share in your losses after you've lost is bad, but forcing their hand is worse. :thumbsdown
Misrepresenting the actual square footage is also unethical, so the sellers share blame.
JuniorBH
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Re: Should I Give Up My Earnest Money

Post by JuniorBH »

Kookaburra wrote: Tue May 18, 2021 12:37 pm Misrepresenting the actual square footage is also unethical, so the sellers share blame.
I agree with this completely. Yes, it might be a technicality, but IMO still a good enough reason to walk away from the contract with your earnest money.

On another note, this thread has been eye opening about the buying/selling process in other states. We're in contract to buy currently in NY and both sides have a lawyer. I can't imagine doing this without a lawyer, especially given the amount of money involved.

We are also able to walk away from the deal if the appraisal comes in low (though we might have lucked out as I know certain buyers are waiving that clause in this market). We wouldn't walk away, but it gives us the leverage to force the sales price down to the appraised amount.
crossbow
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Re: Should I Give Up My Earnest Money

Post by crossbow »

Kookaburra wrote: Tue May 18, 2021 12:37 pm
crossbow wrote: Tue May 18, 2021 12:28 pm
Kaizen Soze wrote: Tue May 18, 2021 11:22 am
barnaclebob wrote: Tue May 18, 2021 10:06 am Don't just give up your earnest money. Make them fight for it, they wont. They'll have to take you to court which will take months. All the while the property will be sitting around not able to be sold.

After the sellers initial shock wears off, offer that they keep $5000 to make up for holding costs of the house.
I loathe this suggestion. I recently sold and had a buyer do this exact thing. They backed out the day before closing and contested the earnest money immediately. They took a hard line. We hired a lawyer and settled after weeks of exchanges, receiving only $2k after legal fees. Our options were to sue them for the deposit, damages, and expenses which would have taken months and a significant amount of stress. While it seemed to be a slam dunk case, anything can happen in the courts so there's risk there as well. Or accept the settlement and move on.

It's a pretty lousy, and imo an unethical, move. You could ask or offer a reduced amount, but please don't "make them fight for it."
Kaizen Soze, sorry this happened to you. It is an unethical move and goes against the very concept of "earnest money". Buyers should not put up earnest money if they aren't earnest enough to lose it should they have a change of heart. Same for waiving contingencies. Don't bet on what you cannot afford to lose. Asking the winner to share in your losses after you've lost is bad, but forcing their hand is worse. :thumbsdown
Misrepresenting the actual square footage is also unethical, so the sellers share blame.
I suppose, but that wouldn't be the primary reason the OP seems to be having second thoughts.
hachiko
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Re: Should I Give Up My Earnest Money

Post by hachiko »

crossbow wrote: Tue May 18, 2021 12:28 pm
Kaizen Soze wrote: Tue May 18, 2021 11:22 am
barnaclebob wrote: Tue May 18, 2021 10:06 am Don't just give up your earnest money. Make them fight for it, they wont. They'll have to take you to court which will take months. All the while the property will be sitting around not able to be sold.

After the sellers initial shock wears off, offer that they keep $5000 to make up for holding costs of the house.
I loathe this suggestion. I recently sold and had a buyer do this exact thing. They backed out the day before closing and contested the earnest money immediately. They took a hard line. We hired a lawyer and settled after weeks of exchanges, receiving only $2k after legal fees. Our options were to sue them for the deposit, damages, and expenses which would have taken months and a significant amount of stress. While it seemed to be a slam dunk case, anything can happen in the courts so there's risk there as well. Or accept the settlement and move on.

It's a pretty lousy, and imo an unethical, move. You could ask or offer a reduced amount, but please don't "make them fight for it."
Kaizen Soze, sorry this happened to you. It is an unethical move and goes against the very concept of "earnest money". Buyers should not put up earnest money if they aren't earnest enough to lose it should they have a change of heart. Same for waiving contingencies. Don't bet on what you cannot afford to lose. Asking the winner to share in your losses after you've lost is bad, but forcing their hand is worse. :thumbsdown
Some people spend money/ fulfill a contract because "it's the right thing to do for the other party to the contract." Other people continue to meet obligations or decide to break contracts if it's the right thing to do for them. They make sure they have outs in contracts, and utilize those to their benefit.

I've found the philosophy of the person is correlated to the type of people/ companies that one interacts with in everyday life. Those that do business with the people around the corner tend to take the first approach in all their dealings. Those that do business with governments and larger businesses tend to take the second approach in all their dealings.
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quantAndHold
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Re: Should I Give Up My Earnest Money

Post by quantAndHold »

barnaclebob wrote: Tue May 18, 2021 10:23 am
hachiko wrote: Tue May 18, 2021 10:13 am My understanding is that earnest money is never a "no matter what." There is a "no matter what" at least in many states. But that's paid directly to the seller, not into escrow. It's essentially a payment as consideration for the ability to back out of a sale. But even if you back out, the seller already has that cash.
I had a friend lose a bidding war on a house because the winner cut a $50k check directly to the sellers that they could cash immediately upon accepting the offer. I dont know what the legalese was but it was effectively a "no matter what" escrow. If the language wasn't iron clad, the buyers would have at least had to fight to get the money back instead of the other way around and thats a big difference.
Yes, this is what happened to us. A few days after the house went into escrow, our realtor brought the check over to our house, and I took it to the bank and deposited it.
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Re: Should I Give Up My Earnest Money

Post by EddyB »

Kookaburra wrote: Tue May 18, 2021 12:37 pm
crossbow wrote: Tue May 18, 2021 12:28 pm
Kaizen Soze wrote: Tue May 18, 2021 11:22 am
barnaclebob wrote: Tue May 18, 2021 10:06 am Don't just give up your earnest money. Make them fight for it, they wont. They'll have to take you to court which will take months. All the while the property will be sitting around not able to be sold.

After the sellers initial shock wears off, offer that they keep $5000 to make up for holding costs of the house.
I loathe this suggestion. I recently sold and had a buyer do this exact thing. They backed out the day before closing and contested the earnest money immediately. They took a hard line. We hired a lawyer and settled after weeks of exchanges, receiving only $2k after legal fees. Our options were to sue them for the deposit, damages, and expenses which would have taken months and a significant amount of stress. While it seemed to be a slam dunk case, anything can happen in the courts so there's risk there as well. Or accept the settlement and move on.

It's a pretty lousy, and imo an unethical, move. You could ask or offer a reduced amount, but please don't "make them fight for it."
Kaizen Soze, sorry this happened to you. It is an unethical move and goes against the very concept of "earnest money". Buyers should not put up earnest money if they aren't earnest enough to lose it should they have a change of heart. Same for waiving contingencies. Don't bet on what you cannot afford to lose. Asking the winner to share in your losses after you've lost is bad, but forcing their hand is worse. :thumbsdown
Misrepresenting the actual square footage is also unethical, so the sellers share blame.
I agree, but the fact that an appraiser reached a different calculation than what was in the listing doesn’t mean there was any misrepresentation. Others have already noted that reasonable calculation methods differ.
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Re: Should I Give Up My Earnest Money

Post by Kaizen Soze »

I may have missed it, but has OP stated what the sqft difference is?
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Re: Should I Give Up My Earnest Money

Post by EddyB »

Kaizen Soze wrote: Tue May 18, 2021 1:49 pm I may have missed it, but has OP stated what the sqft difference is?
“10% smaller than the county record.”
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Re: Should I Give Up My Earnest Money

Post by Jags4186 »

hachiko wrote: Tue May 18, 2021 12:58 pm Some people spend money/ fulfill a contract because "it's the right thing to do for the other party to the contract." Other people continue to meet obligations or decide to break contracts if it's the right thing to do for them. They make sure they have outs in contracts, and utilize those to their benefit.

I've found the philosophy of the person is correlated to the type of people/ companies that one interacts with in everyday life. Those that do business with the people around the corner tend to take the first approach in all their dealings. Those that do business with governments and larger businesses tend to take the second approach in all their dealings.
The reality is that nearly all real estate transactions are a singular transaction between two parties that likely never even communicate directly with each other. Each party should do what’s absolutely in their best interests at all times. There’s no benefit to “being nice” about anything. In this case, the best interests of the buyer who wants to back out is to try to get his money back up to the point where it no longer makes sense to fight for the $50k back. If this was an ongoing relationships where future business dealings could be happening then the calculus is different.
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Re: Should I Give Up My Earnest Money

Post by getthatmarshmallow »

$0.02:* It sounds like you're overly anchored to the appraisal. The point of the appraisal isn't to tell you whether you got a good deal; it's never more than a ballpark for purposes of securing a loan. You'll likely make up the $80K in six months if the market is as hot as you say.

Sq footage can vary based on measuring methods, and 10% doesn't seem unreasonable there. (And probably covered by 'buyer is to verify all measurements, etc.)

The $50,000-$100,000 worth of remodeling is a bigger question, although probably not one that gets you out of the earnest money commitment. What kind of repairs are we talking? Is this "it will cost $50K to build the kitchen of my dreams" or "we need to put in $50K to make the house livable"?

*my two cents came in at 1.9 cents after the appraisal.
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Re: Should I Give Up My Earnest Money

Post by ResearchMed »

getthatmarshmallow wrote: Tue May 18, 2021 2:26 pm $0.02:* It sounds like you're overly anchored to the appraisal. The point of the appraisal isn't to tell you whether you got a good deal; it's never more than a ballpark for purposes of securing a loan. You'll likely make up the $80K in six months if the market is as hot as you say.

Sq footage can vary based on measuring methods, and 10% doesn't seem unreasonable there. (And probably covered by 'buyer is to verify all measurements, etc.)

The $50,000-$100,000 worth of remodeling is a bigger question, although probably not one that gets you out of the earnest money commitment. What kind of repairs are we talking? Is this "it will cost $50K to build the kitchen of my dreams" or "we need to put in $50K to make the house livable"?

*my two cents came in at 1.9 cents after the appraisal.
I think you need to give a refund, right?
Isn't that what this is all about?

:wink:

RM
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Re: Should I Give Up My Earnest Money

Post by getthatmarshmallow »

ResearchMed wrote: Tue May 18, 2021 2:28 pm
getthatmarshmallow wrote: Tue May 18, 2021 2:26 pm $0.02:* It sounds like you're overly anchored to the appraisal. The point of the appraisal isn't to tell you whether you got a good deal; it's never more than a ballpark for purposes of securing a loan. You'll likely make up the $80K in six months if the market is as hot as you say.

Sq footage can vary based on measuring methods, and 10% doesn't seem unreasonable there. (And probably covered by 'buyer is to verify all measurements, etc.)

The $50,000-$100,000 worth of remodeling is a bigger question, although probably not one that gets you out of the earnest money commitment. What kind of repairs are we talking? Is this "it will cost $50K to build the kitchen of my dreams" or "we need to put in $50K to make the house livable"?

*my two cents came in at 1.9 cents after the appraisal.
I think you need to give a refund, right?
Isn't that what this is all about?

:wink:

RM
I will offer half of the two cents back because the content came back at 10% less insightful than usual.
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Re: Should I Give Up My Earnest Money

Post by hachiko »

Jags4186 wrote: Tue May 18, 2021 2:23 pm
hachiko wrote: Tue May 18, 2021 12:58 pm Some people spend money/ fulfill a contract because "it's the right thing to do for the other party to the contract." Other people continue to meet obligations or decide to break contracts if it's the right thing to do for them. They make sure they have outs in contracts, and utilize those to their benefit.

I've found the philosophy of the person is correlated to the type of people/ companies that one interacts with in everyday life. Those that do business with the people around the corner tend to take the first approach in all their dealings. Those that do business with governments and larger businesses tend to take the second approach in all their dealings.
The reality is that nearly all real estate transactions are a singular transaction between two parties that likely never even communicate directly with each other. Each party should do what’s absolutely in their best interests at all times. There’s no benefit to “being nice” about anything. In this case, the best interests of the buyer who wants to back out is to try to get his money back up to the point where it no longer makes sense to fight for the $50k back. If this was an ongoing relationships where future business dealings could be happening then the calculus is different.
To be clear, I personally agree 100%. I was just pointing out that there are those with other feelings, and even though someone happens to be dealing with a non-repeat party, those types of people try to keep everyone happy.

I would say that there are situations where doing what's best for yourself in the short term isn't always good for the long term. If you find a good plumber, and they charge you after the job is complete, you could benefit in the short term by saying "sue me for the money." But in the long term, that's generally not wise, because now you have to waste time trying to find a plumber for your next job after you've already found a good plumber. Plus, people talk.

To bring this back to the OP, I think OP should absolutely do what's best for them. That doesn't always mean getting every cent back that they possibly can on this particular deal. So OP does need to consider that their broker will probably be upset because it makes them look bad. The listing agent will be upset. The seller may be upset, but as you note, the seller's feelings are probably not as relevant. But who knows, OP spent this time to get to know and become comfortable with their broker. Maybe if OP takes a hard stance, OP's broker won't want to work with them anymore. So now they have to spend time finding someone else. Maybe the listing agent tells all their friends the story about this buyer who is backing out and not willing to release any of the escrow. So now OP has trouble getting an offer accepted in this hot market.

I'm not saying OP should or shouldn't do anything, but it's still important to consider the possible downstream effects even if they aren't readily apparent.
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Re: Should I Give Up My Earnest Money

Post by Goal33 »

serbeer wrote: Mon May 17, 2021 5:30 pm
Goal33 wrote: Mon May 17, 2021 10:11 am They can’t just take your 50k and then turnaround and sell the house for more. That’s not reality.

Find a RE with a clue.
Why not? They keep earnest money if buyer changed mind, and house is their to relist at the price they want. These are two independent events, they are not at all connected legally.
because you'll end up in court and it'll prevent you from moving forward with another buyer. You'll end up wanting to finish out that deal by returning the money, and getting another buyer at the same or higher price. Like I said, taking the earnest money from the buyer is just not reality. Ask a buyers agent if they've ever lost the earnest money of their client before or a seller's agent if they've ever kept the earnest money after a buyer backed out. It only happens on rare occasion.
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Re: Should I Give Up My Earnest Money

Post by galawdawg »

Goal33 wrote: Wed May 19, 2021 4:37 pm
serbeer wrote: Mon May 17, 2021 5:30 pm
Goal33 wrote: Mon May 17, 2021 10:11 am They can’t just take your 50k and then turnaround and sell the house for more. That’s not reality.

Find a RE with a clue.
Why not? They keep earnest money if buyer changed mind, and house is their to relist at the price they want. These are two independent events, they are not at all connected legally.
because you'll end up in court and it'll prevent you from moving forward with another buyer. You'll end up wanting to finish out that deal by returning the money, and getting another buyer at the same or higher price. Like I said, taking the earnest money from the buyer is just not reality. Ask a buyers agent if they've ever lost the earnest money of their client before or a seller's agent if they've ever kept the earnest money after a buyer backed out. It only happens on rare occasion.

May I ask upon what you base this statement? While I am not admitted to practice law in Washington State, unless there is an unusual provision in their law of which I am unaware, there is nothing that would hinder the seller in their ability to move forward with another buyer in the event of a breach by the buyer and a subsequent escrow dispute.

In a case such as this generally, if buyer fails to "perform" and is in breach of contract, the seller is free to immediately move forward with a sale to another buyer, if he/she chooses. And while it is not common for earnest money disputes to arise, the reason is that most contracts for the purchase and sale of real estate have sufficient contingencies in place that when issues arise prior to closing there is the often the ability to terminate the agreement without penalty. Most commonly those include financing, appraisal, inspection and due diligence period contingencies.

However, when there is irrational behavior in a frantic real estate market, some will waive all contingencies and overbid for the property in the hopes of "winning" and gambling that the waiving of contingencies will not later prove to have been an unwise strategic decision. And when that happens (as in this case) the potential problems that often surface prior to or at closing can and does result in a breach of contract and a resulting earnest money dispute. Those same problems in a "normal" market will generally result in the failure of a contingency and the contract is either modified or terminated without consequence.

So again, absent a contrary position in Washington State law, the seller is free upon buyer's breach to retain the earnest money AND to move forward with another buyer without delay. And absent a legally justified reason for breaching the contract (which OP does not have based upon his posts and supported by the opinion of the Washington lawyer with whom he consulted), the earnest money will almost certainly be awarded to the seller based upon the relevant provision of Washington law.
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Re: Should I Give Up My Earnest Money

Post by dogagility »

galawdawg wrote: Wed May 19, 2021 8:02 pm
Goal33 wrote: Wed May 19, 2021 4:37 pm
serbeer wrote: Mon May 17, 2021 5:30 pm
Goal33 wrote: Mon May 17, 2021 10:11 am They can’t just take your 50k and then turnaround and sell the house for more. That’s not reality.

Find a RE with a clue.
Why not? They keep earnest money if buyer changed mind, and house is their to relist at the price they want. These are two independent events, they are not at all connected legally.
because you'll end up in court and it'll prevent you from moving forward with another buyer. You'll end up wanting to finish out that deal by returning the money, and getting another buyer at the same or higher price. Like I said, taking the earnest money from the buyer is just not reality. Ask a buyers agent if they've ever lost the earnest money of their client before or a seller's agent if they've ever kept the earnest money after a buyer backed out. It only happens on rare occasion.

May I ask upon what you base this statement? While I am not admitted to practice law in Washington State, unless there is an unusual provision in their law of which I am unaware, there is nothing that would hinder the seller in their ability to move forward with another buyer in the event of a breach by the buyer and a subsequent escrow dispute.

In a case such as this generally, if buyer fails to "perform" and is in breach of contract, the seller is free to immediately move forward with a sale to another buyer, if he/she chooses. And while it is not common for earnest money disputes to arise, the reason is that most contracts for the purchase and sale of real estate have sufficient contingencies in place that when issues arise prior to closing there is the often the ability to terminate the agreement without penalty. Most commonly those include financing, appraisal, inspection and due diligence period contingencies.

However, when there is irrational behavior in a frantic real estate market, some will waive all contingencies and overbid for the property in the hopes of "winning" and gambling that the waiving of contingencies will not later prove to have been an unwise strategic decision. And when that happens (as in this case) the potential problems that often surface prior to or at closing can and does result in a breach of contract and a resulting earnest money dispute. Those same problems in a "normal" market will generally result in the failure of a contingency and the contract is either modified or terminated without consequence.

So again, absent a contrary position in Washington State law, the seller is free upon buyer's breach to retain the earnest money AND to move forward with another buyer without delay. And absent a legally justified reason for breaching the contract (which OP does not have based upon his posts and supported by the opinion of the Washington lawyer with whom he consulted), the earnest money will almost certainly be awarded to the seller based upon the relevant provision of Washington law.
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Kaizen Soze
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Re: Should I Give Up My Earnest Money

Post by Kaizen Soze »

So what did OP decide to do?
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Re: Should I Give Up My Earnest Money

Post by rage_phish »

Kaizen Soze wrote: Tue May 18, 2021 11:22 am
barnaclebob wrote: Tue May 18, 2021 10:06 am Don't just give up your earnest money. Make them fight for it, they wont. They'll have to take you to court which will take months. All the while the property will be sitting around not able to be sold.

After the sellers initial shock wears off, offer that they keep $5000 to make up for holding costs of the house.
I loathe this suggestion. I recently sold and had a buyer do this exact thing. They backed out the day before closing and contested the earnest money immediately. They took a hard line. We hired a lawyer and settled after weeks of exchanges, receiving only $2k after legal fees. Our options were to sue them for the deposit, damages, and expenses which would have taken months and a significant amount of stress. While it seemed to be a slam dunk case, anything can happen in the courts so there's risk there as well. Or accept the settlement and move on.

It's a pretty lousy, and imo an unethical, move. You could ask or offer a reduced amount, but please don't "make them fight for it."

agreed. its a scummy thing today. but the world is filled with scummy people
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Re: Should I Give Up My Earnest Money

Post by chazas »

Lawyer here, not giving legal advice but just practical experience.

I had a house in a “flyover” state I had to sell. Only offer was from a wonky out of state buyer, so I drafted a super tight contract addendum that made it very clear that if they didn’t close before a particular date they’d lose their deposit.

Date comes and goes. In that state the realtor customarily holds the deposit. They refused to release it without a court order, despite clear contract language. I filed an ethics complaint against the realtor. They got a “dean” of the real estate bar saying that the state statue allowing the realtor to seek a court order “unless otherwise agreed” didn’t mean what it said. So even though they’d agreed that the deposit would be released, no go.

So I lawyered up and threatened suit. The wonky buyer finally settled on getting back about 40% of the deposit. My piece about covered my legal costs but by that point I hated them all and it was a matter of principle.

Lesson: it may or may not be ethical, but if I were the OP and really wanted to get out of the deal I wouldn’t discount getting the deposit back, or at least a big chunk of it. Just make sure it’s not me on the other side of it, please. :wink:
softmax
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Re: Should I Give Up My Earnest Money

Post by softmax »

I wouldn't walk away from the earnest money. $80k is not a lot in the greater seattle area.
When I bought my house earlier this year, our appraisal also came lower than what we offered and it was primarily due to the fact that appraisals only look at closed houses in the past. Since you are in the market, you probably already know that the housing price climbs 5~10% nearly every month in this area.
I also had buyer's remorse for ~1 month but now similar homes are being sold at least $50k over what I offered.
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Re: Should I Give Up My Earnest Money

Post by epargnant »

quantAndHold wrote: Tue May 18, 2021 10:03 am
Kookaburra wrote: Mon May 17, 2021 8:22 pm
ResearchMed wrote: Mon May 17, 2021 8:00 pm
Goal33 wrote: Mon May 17, 2021 10:11 am They can’t just take your 50k and then turnaround and sell the house for more. That’s not reality.

Find a RE with a clue.

To OP (and a few others):

Don't forget... sometimes we (OP and others) are the *sellers*.

So... how would it be if you accept an offer, one that is very attractive due to few or no contingencies, and had turned down one or possibly several otherwise "good offers"... just not quite as good, or so it seemed.
You are delighted, everything looks good, and you thus move forward with your own plans, whatever they may be.
Perhaps that includes signing on the dotted line for another property, which is fine, because you know you'll be selling this house and can easily pay off that bridge loan fast (so no worry about that unpleasant rate; it's just for a month or so, right!?). There is that nice new house to look forward to, and where *you* put down what might be much more earnest money than just $50k! After all, you KNEW that you'd be closing soon and how much risk was there in this case, eh?? :happy All is good, even though moving is SUCH a pain.
And/or there are other ways that you've moved forward with plans that can't easily - or can't inexpensively - be changed.
All is good.

Indeed, you wrote on some really wonderful financial website forum :wink: that you JUST ACCEPTED A GREAT OFFER!
YAY YOU! :beer

Ooooops.... :annoyed
Not too long before closing, that nice buyer, the folks you thought loved your house SO much (!!)... er, turns out they DON'T. :shock:
Not only are they not going to close on the house, forcing you to start the listing process over again, but *maybe* one of the other offers is still interested? Or is this market so hot that they panicked at losing out on "their dream home" and they *quickly* had an offer accepted on that next one. [Yay THEM!]
Turns out now that "nice buyer" is threatening to sue you for that earnest money... that money that's intended to partially compensate you for the aggravation and costs of needed to start the process over. Say what!? How much more will THAT cost!?
Plus, your house is now in total disarray! Packing boxes EVERYWHERE!
Packing and moving - GRRRR!

All that nice staging, pretty bedspreads borrowed from BFF but now sent back by FedEx overnight, and those lovely lace tablecloths that you've already sent off to Dear Children (who actually really DID want them - how nice was that!??). And the RE agent had absolutely insisted that you spend $X for a few <whatevers> to help with staging. If only you hadn't already paid to have them returned early...
That grand piano, already moved out (that humongous thing; hard to schedule a good piano mover; lucked out with that time slot!). Too bad; it *really* did look nice in that alcove in the Living Room! Everyone always said it 'made the house on the first impression' :happy
And those stacks and stacks of papers and books you finally are ready to finish up now that x, y, and z have *almost* been all packed up...

Where is that Xanax? Did it already get packed up too!???

:confused

RM
Let me get out my violin and play some sad music for the sellers.

Too bad that none of that is relevant in this inferno market. No one is putting that much effort into staging and prettying something up when you could leave it in disrepair and have a bidding war regardless. Seller could relist immediately and have several offers within hours.
I was a seller in this exact market. ResearchMed’s description is exactly correct. We wanted a quick sale for the best price we could get, so we did the same stuff you always do when you sell a house. We spent months fixing, painting, cleaning, to get it ready for sale. Borrowed a bunch of stuff, and moved a U-Haul load of other stuff into storage to stage it. Because it was a feeding frenzy market and there were going to be a dozen showings every day, we moved into an AirBNB while it was on the market. We got six offers, and the one we picked had $50k in earnest money and no contingencies, and had a clause saying that we got to keep the earnest money, no matter what. Beyond getting a good price, our number one criteria when evaluating the offers was to have a trouble free closing, and this offer looked good from that perspective.

Once we had an accepted offer, we started a major remodel on the house we were moving into, scheduled movers, moved all the stuff from storage back into the house (still in boxes), returned the borrowed stuff, and started packing the rest. If the buyer had backed out less than 10 days before closing, we would have had a house full of boxes, movers coming in a week, and our cars would have already been on a truck, en route to another city. It would have taken a couple of weeks and a lot of work (and money) to prepare it to be shown again, and then another week or two on the market and another 30 days to closing. We would have needed to reschedule the movers and rent a car, and the remodeling bills would have started coming in before we had the proceeds from the sale. We could have just kept the moving date and shown an empty house, but that would likely have resulted in a lower sale price.

Heck yes, we would have fought like a badger in a phone booth to keep the earnest money.
I can definitely relate to the seller's perspective above.. and we did get to keep a failed buyer's earnest money when we were selling our condo. Contract signed in early June (2013), settlement date set for early July after lots of negotiations on crazy things like paying for a certified professional to repair an easily fixed broken window screen and verify that an ice maker worked (after the home inspector couldn't figure out how to take off the child lock.) Then a day before settlement we signed the first of about 10 settlement date extensions because the buyers could not get their down payment together though their financing was set. It got to the point where settlement was supposed to be in 2 more weeks, then 1 week, then tomorrow, then tomorrow again, then at 9am, then Noon, then 5pm, then the next morning (not exaggerating). We finally gave them until Noon one day in August. They were not ready, said give us till 5pm. We said no despite our realtor wanting us to wait. We kept their earnest money, no protest was made except some guilt that had we just waited a few more hours.... I felt no guilt. We had basically stopped our lives for a week in order to be ready to settle more than 30 days later than planned, and we had taxes/insurance/mortgage on the condo longer than we planned after having closed on our new house early June. Thank goodness buying our new house was not contingent on selling the condo.

We then turned around and sold the condo at a higher price in September. I felt no guilt, though I am by nature a scrupulous person. That buyer gave us nothing but stress and uncertainty for 2 months. Our realtor said keeping the earnest money was completely within our rights and didn't seem to indicate it was very rare.

Much different situation than OP, just sharing a seller's perspective and giving anecdotal evidence that it is not impossible to keep earnest money and turn around and sell at a higher price.
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F150HD
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Re: Should I Give Up My Earnest Money

Post by F150HD »

when a decision is made please update the first post & tack the outcome on. Thanks.
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Re: Should I Give Up My Earnest Money

Post by Kookaburra »

softmax wrote: Mon May 24, 2021 1:13 pm Since you are in the market, you probably already know that the housing price climbs 5~10% nearly every month in this area.
If this is true (120% appreciation per year), then I think we are in a bubble.
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Re: Should I Give Up My Earnest Money

Post by FlamePoint »

I would challenge the square footage on the appraisal. If the county has the square footage higher, chances are it’s based on the original plans filed by the builder. Measuring square footage is not an exact science and can vary from one appraise to the other. And there’s a good chance the lower square footage is also driving the 80k difference between the purchase price and the appraisal amount.

Having sold a $1M home in the Seattle area last year I know how challenging the market is…….good for sellers, bad for buyers. OP most likely isn’t going to get any concessions from the seller since they are in the drivers seat in this crazy hot market.
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Re: Should I Give Up My Earnest Money

Post by FlamePoint »

quantAndHold wrote: Tue May 18, 2021 10:03 am
Kookaburra wrote: Mon May 17, 2021 8:22 pm
ResearchMed wrote: Mon May 17, 2021 8:00 pm
Goal33 wrote: Mon May 17, 2021 10:11 am They can’t just take your 50k and then turnaround and sell the house for more. That’s not reality.

Find a RE with a clue.

To OP (and a few others):

Don't forget... sometimes we (OP and others) are the *sellers*.

So... how would it be if you accept an offer, one that is very attractive due to few or no contingencies, and had turned down one or possibly several otherwise "good offers"... just not quite as good, or so it seemed.
You are delighted, everything looks good, and you thus move forward with your own plans, whatever they may be.
Perhaps that includes signing on the dotted line for another property, which is fine, because you know you'll be selling this house and can easily pay off that bridge loan fast (so no worry about that unpleasant rate; it's just for a month or so, right!?). There is that nice new house to look forward to, and where *you* put down what might be much more earnest money than just $50k! After all, you KNEW that you'd be closing soon and how much risk was there in this case, eh?? :happy All is good, even though moving is SUCH a pain.
And/or there are other ways that you've moved forward with plans that can't easily - or can't inexpensively - be changed.
All is good.

Indeed, you wrote on some really wonderful financial website forum :wink: that you JUST ACCEPTED A GREAT OFFER!
YAY YOU! :beer

Ooooops.... :annoyed
Not too long before closing, that nice buyer, the folks you thought loved your house SO much (!!)... er, turns out they DON'T. :shock:
Not only are they not going to close on the house, forcing you to start the listing process over again, but *maybe* one of the other offers is still interested? Or is this market so hot that they panicked at losing out on "their dream home" and they *quickly* had an offer accepted on that next one. [Yay THEM!]
Turns out now that "nice buyer" is threatening to sue you for that earnest money... that money that's intended to partially compensate you for the aggravation and costs of needed to start the process over. Say what!? How much more will THAT cost!?
Plus, your house is now in total disarray! Packing boxes EVERYWHERE!
Packing and moving - GRRRR!

All that nice staging, pretty bedspreads borrowed from BFF but now sent back by FedEx overnight, and those lovely lace tablecloths that you've already sent off to Dear Children (who actually really DID want them - how nice was that!??). And the RE agent had absolutely insisted that you spend $X for a few <whatevers> to help with staging. If only you hadn't already paid to have them returned early...
That grand piano, already moved out (that humongous thing; hard to schedule a good piano mover; lucked out with that time slot!). Too bad; it *really* did look nice in that alcove in the Living Room! Everyone always said it 'made the house on the first impression' :happy
And those stacks and stacks of papers and books you finally are ready to finish up now that x, y, and z have *almost* been all packed up...

Where is that Xanax? Did it already get packed up too!???

:confused

RM
Let me get out my violin and play some sad music for the sellers.

Too bad that none of that is relevant in this inferno market. No one is putting that much effort into staging and prettying something up when you could leave it in disrepair and have a bidding war regardless. Seller could relist immediately and have several offers within hours.
I was a seller in this exact market. ResearchMed’s description is exactly correct. We wanted a quick sale for the best price we could get, so we did the same stuff you always do when you sell a house. We spent months fixing, painting, cleaning, to get it ready for sale. Borrowed a bunch of stuff, and moved a U-Haul load of other stuff into storage to stage it. Because it was a feeding frenzy market and there were going to be a dozen showings every day, we moved into an AirBNB while it was on the market. We got six offers, and the one we picked had $50k in earnest money and no contingencies, and had a clause saying that we got to keep the earnest money, no matter what. Beyond getting a good price, our number one criteria when evaluating the offers was to have a trouble free closing, and this offer looked good from that perspective.

Once we had an accepted offer, we started a major remodel on the house we were moving into, scheduled movers, moved all the stuff from storage back into the house (still in boxes), returned the borrowed stuff, and started packing the rest. If the buyer had backed out less than 10 days before closing, we would have had a house full of boxes, movers coming in a week, and our cars would have already been on a truck, en route to another city. It would have taken a couple of weeks and a lot of work (and money) to prepare it to be shown again, and then another week or two on the market and another 30 days to closing. We would have needed to reschedule the movers and rent a car, and the remodeling bills would have started coming in before we had the proceeds from the sale. We could have just kept the moving date and shown an empty house, but that would likely have resulted in a lower sale price.

Heck yes, we would have fought like a badger in a phone booth to keep the earnest money.
Ditto.

This was us a year ago. Our home was in a VERY desirable sought after community. We had 50 people come through it the first 2 days it was on the market. All offers were accepted on a certain date, then reviewed.

The offer we accepted was well over asking price with no contingencies. It included $50k earnest money, 1/2 of which was wired to us by the escrow company to our personal account 5 days after we accepted the offer.

In a crazy hot market like Seattle, buyers really have very limited options.
softmax
Posts: 299
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Re: Should I Give Up My Earnest Money

Post by softmax »

Kookaburra wrote: Mon May 24, 2021 11:22 pm
softmax wrote: Mon May 24, 2021 1:13 pm Since you are in the market, you probably already know that the housing price climbs 5~10% nearly every month in this area.
If this is true (120% appreciation per year), then I think we are in a bubble.
It will plateau for sure at some point. You just don’t know when.
corpgator
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Re: Should I Give Up My Earnest Money

Post by corpgator »

Found this through google when reading about earnest money - whole thread is hilarious. You're making $500k and worried about $50k? Why are you even compromising on a house in the first place? Sell the old one, hold this one that you bid on but don't like and rent it out, then go get yourself a place you actually want to live in. Life is too short to make so much money and squabble over pennies.
ronno2018
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Re: Should I Give Up My Earnest Money

Post by ronno2018 »

OK, OP, what the heck happened?

Personally, I think you should just buy the damn house. I live in a HCOL area on the west coast and in 30 years the home prices have just gone up and up and up.

So if you plan on staying for seven years you will do well. Ignore the school ratings like someone above mentioned.

On the other hand your annual income is insane and you should probably spend more on a house. LOL! :sharebeer
User avatar
celia
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Location: SoCal

Re: Should I Give Up My Earnest Money

Post by celia »

I heard that the house across the street, with the same floor plan, will be listed for $1.1M next month. So you are getting a good deal on this house.

Does that change how you look at this?
srt7
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Re: Should I Give Up My Earnest Money

Post by srt7 »

RelaxNoMore wrote: Sun May 16, 2021 1:28 pm ...

However, after seeing the significant low appraisal, we are more and more feeling uncomfortable with this purchase. The house was built in late 80th, appliances need replacements too. Another $50K - $100K will be needed to renovate. The appraisal report shows that the house size is actually 10% smaller than the county record. We could in theory still make the down payment and make up the gap. But we wouldn’t have cash left for remodeling. Considering purchase price plus reno cost, we would be one of the most expensive homes in the community, we worry about the growth potential of this house for future sell. On school zone, its assigned elementary school is not great. Lastly, the location is now 25min drive away from work, we do worry about increasing commute time after COVID.
...
The ones in bold are your "outs". I mean 10% smaller is considerable for a $1MM Seattle house. It would be a different matter in Texas or Nevada or Colorado where houses can be HUGE.

Personally, I would never consider throwing away $50K and especially not for a $80K appraisal/offer difference and in this borderline stupid market? Not a chance in hell. Worst case (like someone above mentioned) I'd just go ahead with the purchase and re-list it. I'm sure there's a bigger fool who'd buy it for more than $1.08MM.

Now ... on the buyer's remorse/cold feet DON'T beat yourself up. It's a crazy market and losing bid after bid messes with your logical thinking at which point all a buyer wants is to win and get an accepted offer. Logic and reasoning be damned! Ask me how I know :wink:
Taking care of tomorrow while enjoying today.
Tavistock1
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Re: Should I Give Up My Earnest Money

Post by Tavistock1 »

nitpick wrote: Sun May 16, 2021 3:31 pm
Archimedes wrote: Sun May 16, 2021 3:29 pm The fact that the listed square footage and the actual square footage is discrepant could offer you a reason to back out of the deal and get your earnest money back. These erroneous details could constitute a material difference that factored in your decision. Again, this type of error may allow you to get out of the deal and get your earnest money back. Talk to your attorney immediately!
This is the best advice! Lawyer up if needed!
In most states the listing has a disclaimer stating something like “the information in this listing is reliable but not guaranteed” check your listing if that’s the case
campy2010
Posts: 1252
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Re: Should I Give Up My Earnest Money

Post by campy2010 »

corpgator wrote: Mon Jul 26, 2021 11:45 pm Found this through google when reading about earnest money - whole thread is hilarious. You're making $500k and worried about $50k? Why are you even compromising on a house in the first place? Sell the old one, hold this one that you bid on but don't like and rent it out, then go get yourself a place you actually want to live in. Life is too short to make so much money and squabble over pennies.
This thread is months old at this point. Presumably the OP found a path forward by now. No need to comment and make others think it is a current topic.
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