Ask a Realtor anything

[Benz]

Re: Ask a Realtor anything

Frankly the deposit is quite meaningless in the grand scheme of things.

So, what's the point of it?

I always thought that the deposit was a sign of good faith on the part of the buyer as well as a commitment that the deal would be honoured. Otherwise, what real risk does the buyer have?

For example, a person offers his house for sale after doing all of the common preparations (staging, realtor open houses, etc.) and then deals with the public open house(s), private showings and reviewing offers. A suitable offer is eventually accepted and a deal is made that includes a deposit and a 60-day close. After 50 days, the buyer bails out, leaving the seller to start again.

Why should the buyer just be able to walk away with his deposit?

[veryold]

Re: Ask a Realtor anything

So, what's the point of it?

I always thought that the deposit was a sign of good faith on the part of the buyer as well as a commitment that the deal would be honoured. Otherwise, what real risk does the buyer have?

For example, a person offers his house for sale after doing all of the common preparations (staging, realtor open houses, etc.) and then deals with the public open house(s), private showings and reviewing offers. A suitable offer is eventually accepted and a deal is made that includes a deposit and a 60-day close. After 50 days, the buyer bails out, leaving the seller to start again.

Why should the buyer just be able to walk away with his deposit?

OK, this morning when i asked the "deposit" question, i knew nothing about it. Now, and 4 hours later, i'm an "expert", thanks google and TGN, lol.

So, in brief, and only if there are NO CONDITIONS:
1) deposit is held with the RE until closing
2) if buyer bails out and does not close, the deposit is NOT AUTOMATICALLY given to seller, and one of these things happen:
2.1) out of court settlement, usually btwn the lawyers.
2.2) court time, but in almost all cases, the ruling ends in seller's favor and they keep deposit. Or, the court orders the house re-listed and if sold for equal or lower, seller keeps the whole deposit, prorated if the house sells for more.

Please correct me where i erred.

Cheers !

[Frorose]

Re: Ask a Realtor anything

OK, this morning when i asked the "deposit" question, i knew nothing about it. Now, and 4 hours later, i'm an "expert", thanks google and TGN, lol.

So, in brief, and only if there are NO CONDITIONS:
1) deposit is held with the RE until closing
2) if buyer bails out and does not close, the deposit is NOT AUTOMATICALLY given to seller, and one of these things happen:
2.1) out of court settlement, usually btwn the lawyers.
2.2) court time, but in almost all cases, the ruling ends in seller's favor and they keep deposit. Or, the court orders the house re-listed and if sold for equal or lower, seller keeps the whole deposit, prorated if the house sells for more.

Please correct me where i erred.

Cheers !

We have introduced a clause in our contracts that basically states The buyer agrees to forfeit the deposit and allow it to be paid directly within two days of closing date to the seller should the deal not close. Our lawyer is currently tweeking it.

I did a multiple offer (10 offers) the other day on one of my listings and the addition of this clause helped keep some of the less qualified financially away. We also requested a $20K draft to be brought with the offer.

I have discovered a lot of shenanigans in Brampton this last week let me tell ya, but we settled on a solid offer, with back up documentation for financing and a solid deposit. Buyer had no issue signing the extra clause.


As it is currently written the new clause:

If the Buyer fails to complete this transaction on the agreed-upon Completion Date contained herein, the Buyer hereby agrees to immediately forfeit the Buyer"s Deposit to the Sellers, and the Buyer hereby irrevocably instructs, authorizes and directs the Deposit Holder to release and disburse the Buyer"s Deposit to the Sellers, in full and without deduction, and by no later than two (2) Business Days after the failed Completion Date, without any further written release, instruction, authorization or direction from the Buyer.

Lawyer is tweeking it a bit to deal specificially with the mutual release portion.

[Frorose]

Re: Ask a Realtor anything

I will note that we will use the above clause with discretion. There are deals that are not closing of late due to crazy bidding wars and banks not financing the full sale price.

Ultimately I am here to help protect my seller so where there are questions of financing issues or other issues that may result in a deal not closing we will protect them as best we can.

Our brokerage has had very few deals not close in the last year but we don't take chances.

[veryold]

Re: Ask a Realtor anything

I will note that we will use the above clause with discretion. There are deals that are not closing of late due to crazy bidding wars and banks not financing the full sale price.

Ultimately I am here to help protect my seller so where there are questions of financing issues or other issues that may result in a deal not closing we will protect them as best we can.

Our brokerage has had very few deals not close in the last year but we don't take chances.

i know nothing about the law, and while your "clause" looks/sounds great as additional protection for the seller, my question is if it's enforceable if challenged in the courts

[Shankapotamus86]

Re: Ask a Realtor anything

This has likely been asked or at least answered in a question not worded the same, but I haven't read each post on each page.

When interviewing agents to sell your house and they say "I'll charge 1% commission to sell your house." What does this mean to me, as the seller.... what does it mean to the other agent and what does it mean in terms of the total commission that has to be paid?

[Frorose]

Re: Ask a Realtor anything

i know nothing about the law, and while your "clause" looks/sounds great as additional protection for the seller, my question is if it's enforceable if challenged in the courts

It's a new one so time will tell. As mentioned the lawyer is tweeking it a bit so we'll see if it's ever needed I'll let you know. The hope is we never have to enforce it.

[Frorose]

Re: Ask a Realtor anything

This has likely been asked or at least answered in a question not worded the same, but I haven't read each post on each page.

When interviewing agents to sell your house and they say "I'll charge 1% commission to sell your house." What does this mean to me, as the seller.... what does it mean to the other agent and what does it mean in terms of the total commission that has to be paid?

You would have to clarify with the agent himself/herself. I would interpret that as 1% selling commission and whatever is posted as cooperating brokerage commission is seperate. Ask very specifically What is the commission to be paid to cooperating brokerage. (buyer agent)

[davepratt]

Re: Ask a Realtor anything

So, what's the point of it?

I always thought that the deposit was a sign of good faith on the part of the buyer as well as a commitment that the deal would be honoured. Otherwise, what real risk does the buyer have?

For example, a person offers his house for sale after doing all of the common preparations (staging, realtor open houses, etc.) and then deals with the public open house(s), private showings and reviewing offers. A suitable offer is eventually accepted and a deal is made that includes a deposit and a 60-day close. After 50 days, the buyer bails out, leaving the seller to start again.

Why should the buyer just be able to walk away with his deposit?

Legally they can't but they've got you between a rock and a hard place and you're usually best to move on with life.

[davepratt]

Re: Ask a Realtor anything

OK, this morning when i asked the "deposit" question, i knew nothing about it. Now, and 4 hours later, i'm an "expert", thanks google and TGN, lol.

So, in brief, and only if there are NO CONDITIONS:
1) deposit is held with the RE until closing
2) if buyer bails out and does not close, the deposit is NOT AUTOMATICALLY given to seller, and one of these things happen:
2.1) out of court settlement, usually btwn the lawyers.
2.2) court time, but in almost all cases, the ruling ends in seller's favor and they keep deposit. Or, the court orders the house re-listed and if sold for equal or lower, seller keeps the whole deposit, prorated if the house sells for more.

Please correct me where i erred.

Cheers !

Everything correct except 2.2. It can have many various versions/results.

[davepratt]

Re: Ask a Realtor anything

i know nothing about the law, and while your "clause" looks/sounds great as additional protection for the seller, my question is if it's enforceable if challenged in the courts

I doubt it. There are far too many holes in that clause. What if the house burned down before closing? What if the buyer died? Etc etc. A smart lawyer would have that tossed in a New York minute. It also doesn't say which party caused it not to close. What the seller caused it? Does he still get to keep the deposit? According to your clause, the answer is yes.

[davepratt]

Re: Ask a Realtor anything

This has likely been asked or at least answered in a question not worded the same, but I haven't read each post on each page.

When interviewing agents to sell your house and they say "I'll charge 1% commission to sell your house." What does this mean to me, as the seller.... what does it mean to the other agent and what does it mean in terms of the total commission that has to be paid?

The listing agreement spells out the total commission and the breakdown on how much each side gets.

[golfingoalie]

Re: Ask a Realtor anything

I sit unethical for your agent to ask the other agent to drop 1/2 a point in commission in order for your client to accept and get what they want from an offer?

[davepratt]

Re: Ask a Realtor anything

I sit unethical for your agent to ask the other agent to drop 1/2 a point in commission in order for your client to accept and get what they want from an offer?

It's borderline but when the deal is that close, a cooperating agent will either cut the 1/2 point or try to increase his client's offer to make up the difference. He should however not be asked and if he wants the deal, he'll usually cut the 1/2 point.
Funny story: I sold a golden retriever breeders house many years ago and she had a litter coming. I asked how much the pups were and she said $800. I said I'll peel $800 off the commission and you give a dog and she said fine. When my broker asked what that was all about I just said you do what you have to do to get the deal. Based on my 70/30 split at that time, my broker basically paid for 30% of my dog.

[Frorose]

Re: Ask a Realtor anything

I doubt it. There are far too many holes in that clause. What if the house burned down before closing? What if the buyer died? Etc etc. A smart lawyer would have that tossed in a New York minute. It also doesn't say which party caused it not to close. What the seller caused it? Does he still get to keep the deposit? According to your clause, the answer is yes.

Buyer dies, the estate remains responsible for the sale regardless.

If you read the clause it did state that if the Buyer fails to close. If the seller fails to close that is a different issue altogether. Our lawyer is still tweeking it as mentioned.

Lawyers can poke holes in anything but long and short it was used in this case to weed out the less qualified buyers and it did it's job. The three weakest overall offers would not sign it... worked for us.