Can the Seller Keep My Deposit? One of the most common concerns that buyers have revolves around RISK FACTORS with regard to their ESCROW DEPOSIT. Rightfully, buyers want to minimize their risk, and protect themselves. So… ” Can a SELLER keep my money?” The short answer is yes… if the buyer does not abide by the terms of the contract, and the time frames.
Whether your escrow deposit ( known as an ‘earnest money deposit’ or ‘good faith deposit’) is $1,000 or $100,000, the guidelines arethe same. The time frames for any real estate transaction are specified in the contract, and they must be adhered to. Those time frames begin from the EFFECIVE DATE of the contract (which is the date on which the last party puts the final signature/initial/date on the contract, andthat contract is delivered to the other party). Time frames include: applying for financing, inspection deadlines, financing commitment deadlines, providing clear title, surveys, closing open permits, and appraisals, association approval, and closing ON OR BEFORE A SPECIFIED DATE… .
The seller cannot KEEP the escrow deposit UNLESS the terms of the contract are breeched. The contract itself provides ‘outs’ for the buyer, however the buyer must apply for financing within the timeframe specifed in the contract, and must abide by the terms and conditions of the contract. Inability to obtain financing by a certain date, inspections that reveal unsatisfactory conditions, inability to provide clear title, the discovery of mold … any of these can be grounds for cancelling a contract. Advising the seller in writing, prior to the deadlines specified, entitles the buyer to his/her return of escrow.
When CAN the seller KEEP the escrow deposit? Non-performance on the part of the buyer… and for failing to stay within the time frames specified in the contract (without proper and timely written amendments, agreed upon by both parties)…So make sure you have a good Realtor and/or real estate attorney! TIME FRAMES are stated in the contract. If the buyer cannot obtain financing by the specified date, an extension in the form of an addendum needs to be drawn up. If not the buyer’s escrow is at risk.
Escrow shows good faith, intent and sincerity on the part of the buyer. (A seller is walking on thin ice, if he/she pulls a property listing from the market without having a substantial good faith deposit). A hefty escrow deposit can strengthen an offer. (Exception: I usually advise minimal deposits on “short sales”)
Bottom line… How can you avoid risk? Follow the time frames and conditions of your contract. Rely on a professional Realtor and use a real estate attorney. If you are interested in buying or selling property in Miami, please give me a call at 305-793-1365 or send me a note here. If you would like to stay informed about current Miami real estate information you can receive updates directly to your inbox by subscribing below.