Earnest money is just that, a
deposit in Escrow that states you the buyer, wants the seller to withdraw the
property off the market for so many days. You earnestly promise to purchase the
property if the seller agrees by signing legally binding escrow instructions.
This tool, the earnest money deposit is held against the buyers many times as
leverage to force him to buy a home at any price.
The buyer who earnestly tries
to purchase a property and then cannot through no fault of his own is entitled
to his money returned, but many times a Broker or Seller will pressure the
buyer to stay in an escrow against his will. He is pressured to accept a home
he is not happy to purchase.
Ethical Behavior is Just
Good Business:
This is where ethical
behavior comes into real estate. It is unethical for a Realtor to hold the
earnest money as a tool against the buyer. It is unethical to require a buyer
to purchase a home, unless there is not a valid reason to proceed. But, like
many things, it happens every single day.
A really good ethical Realtor
would never require a buyer to pay a large amount of money in escrow to begin
with. On a small home, $1000 is sufficient. If there are bidding wars going on,
then a larger deposit is required. Sellers do feel better with an offer that
has $2000 or more, but it is a useless scenario.
The buyer always win in the
end, if he knows anything about real estate at all. He signs a contract
guaranteeing him arbitration. The arbitration clause states the most he can
lose is $1500 in most states. So even if they went for everything he has, that
is the most he can lose. Most agents who follow their brokerage, knows that it
is against policy to hold a buyer against his will in a contract. As with
sellers, they are released automatically with a little pushing.
No brokerage wants to be
involved in a lawsuit. If the buyer will just say the words,
"Lawsuit" they will set him free. But hungry agents and hungry
Brokers today in this awful market play the trump card and threaten the buyer,
that he will be sued for the entire amount of the home, which is correct. The
buyer can be sued if the seller presses charges, unless they signed the
arbitration clause.
But unethical brokers and
unethical agents will pressure the buyer, by not telling him the truth. They
will tell him all kinds of bad things just to get one "lousy"
paycheck. That buyer will tell everyone how he was treated and they will lose
more business than it was worth. The buyer will remain in the deal, but he will
not be happy and an unhappy buyer will tell 9 people. A happy buyer will tell
one person.
It is never worth the
consequences to hold a buyer in a contract when he does not want to purchase
the home. It is very sad today as many buyers will go and see another home they
like better and try to break their contract illegally, causing everyone
hardships. The seller lost prospective buyers for his home by taking it off the
market and the agent loses the commission. In the times of hardships, everyone
is suffering. It seems more and more that not only are Brokers unethical in
some cases, but buyers are falling into the trap also.
Many unethical Brokers are
also soliciting buyers when they know they are in a deal already. It is against
every rule, that the Board of Realtors maintains. An agent can be brought up on
charges for soliciting another persons client. A Broker has a fiduciary duty to
his client and a client owes loyalty to his Broker.
Legally the buyer is entitled
to cancel his contract for many reasons.
1. Does not qualify for the
loan.
2. The house does not
appraise.
3. The house fails the home
inspection.
4. The seller refuses to
repair items on the home inspection.
5. The title report shows the
owner of the property is not the one signing the contract.
If any of these items come
up, the buyer has a right to cancel the contract and receive all his money
back. The only way this can happen though is with signed cancellation
instructions in escrow. Should the seller delay, there is very little the buyer
can do other than threaten to sue or go to arbitration.
Many sellers will delay
hoping the agents put the deal together and in some cases it does happen. It is
never a good thing to threaten your buyer or place him in jeopardy. It is
better to cancel the contract and place him in a different home. If he does
want a new agent, then hopefully down the road he will refer to you a buyer.
Keeping your reputation clean is more important than winning $500.
No comments:
Post a Comment