Posted by Julia on July 12, 2001 at 11:14:58:
it’s nice to be able to give something back once in a while! 
J.
Urgent- can deposit be deemed non-refundable? - Posted by Ben(nj)
Posted by Ben(nj) on July 12, 2001 at 06:31:07:
I recently foreclosed on a property and the former owner will be evicted tomorrow. At the last minute her father-in law offered to buy back the house from me at nearly full market value in cash. Sounds great but I am worried this may be a bluff to stop the eviction. In other words he can sign the contract, halt the eviction and then kill the contract during attorney review period. Then I have to start the eviction process paperwork over again which is a nightmare, possibly filing a new writ of possession,etc,etc. Anyway, to guard against this I requested a 10% NON-refundable deposit. Buyer is willing to do this but my real estate agent is hesitant saying it is contrary to real estate law. What do you pros think? Any alternative safeguards?
Re: Urgent- can deposit be deemed non-refundable? - Posted by SCook85
Posted by SCook85 on July 12, 2001 at 14:45:25:
Where I live, deposits are always refundable when there is a financing contingency. If you make a cash offer your deposit is out there.
I think you are being generous by taking only a 10% deposit. If he wants to pay cash, considering the circumstances I would ask him to put the entire purchase price into escrow with your attorney. Have you verified whether or not he even has the funds? Nothing like the whole purchase price sitting in escrow. I would want a clean contract with absolutely no contingencies. After all if anything is wrong with the home, his children did it and they should be responsible.
Good luck with it,
Steve
Re: Urgent- can deposit be deemed non-refundable? - Posted by JohnBoy
Posted by JohnBoy on July 12, 2001 at 09:45:11:
Get the 10% in CASH, not check, not cashiers check, not certified check, but CASH…payable directly to the seller, YOU, not realtor. Make deposit NON-Refundable and buyer forfeits deposit as liquidated damages if buyer fails to close for ANY REASON!
If the buyer does not comply then continue with the eviction. He can always buy the property after if he’s serious. Besides, this would be a contract between you and the father as a new buyer and would have nothing to do with his daughter occupying the property.
Tell him the 10% non-refundable deposit in CASH, TODAY, will stop your eviction process for now. If he closes on time he has nothing to worry about. If he doesn’t close the 10% will compensate and cover any future expenses to file another eviction.
Tell the realtor you will ONLY agree to this as long as YOU are getting the deposit, not the realtor! Otherwise they lose a sale! If the buyer doesn’t close then the realtor still has the listing to sell the property to another buyer.
Do NOT make ANY exceptions! It’s YOUR way or NO way, period! Otherwise, tell him he can still enter into a contract to purchase the property but you will continue with the eviction. If he closes before the sheriff shows up to remove his daughter from the property then he has nothing to worry about, otherwise he can let her move back in after he closes and she can move in with him until then! So it’s 10% in CASH, TODAY, as non-refundable earnest deposit to stop the eviction or the eviction will proceed! NO EXCEPTIONS!!!
Have your agent quote you the law… - Posted by Julia
Posted by Julia on July 12, 2001 at 09:37:32:
I am not a lawyer, and this is NOT legal advice…
That said, this is from “Essentials of New Jersey Real Esate” (5th Ed.):
“Liquidated damages are an amount of money, agreed to in advance by buyer and seller, that will serve as compensation if one party does not live up to the contract. If a sales contract specifies that the earnest money deposit will serve as liquidated damages in case of default by the buyer, the seller will be entitled to keep the deposit if the buyer refuses to perform for no good reason. The seller who does choose to keep the deposit as liquidated damages may not sue for any further damages.”
Hope this helps-
Julia (NJ)
Re: Urgent- can deposit be deemed non-refundable? - Posted by Nate(DC)
Posted by Nate(DC) on July 12, 2001 at 09:36:16:
I like Sue’s suggestion. Just because the eviction has taken place does not mean he cannot buy the place and move them back in. Tell him that the eviction will stop when he puts up the full amount, non-refundable, with an escrow agent of your choosing…
NT
Re:Deposit - Posted by Rene Perrin
Posted by Rene Perrin on July 12, 2001 at 09:28:11:
Ben-
Why not call it option consideration?
RP
Re: Urgent- can deposit be deemed non-refundable? - Posted by JT - IN
Posted by JT - IN on July 12, 2001 at 07:43:53:
Ben:
Yes, the deposit can be deemed non-refundable, however, with an agent involved, (and why is agent involved, anyway?), the agent will be holding the earnest money deposit, payable to their agency. The problem will arrise, if/when you need to collect ths deposit, the agent will not release it, unless the defaulted buyer waives/releases their deposit being turned over to seller, as liquidated damages. If the deal reaches this point, where buyer has defaulted, and they have previously agreed to forfeit earnest $$$, they never quite look at it the same, at this point, as they did when they thought they were getting the house, so don’t expect them to sign off on releasing the $$$. Soooo, I would insist, (seeing how you are taking the agent way out of their comfort zone already), that YOU hold the earnest $$$ not the agent. Might as well get that squared away right up front, or else this will be a big problem down the road!
One other thing, if you read the agency (listing or sale) agreement, it will likely say something to the effect that the agency will get 50% of the earnest $$$ is buyer defaults, to go toward their “precious commission”. Don’t stand for that either! As an investor, you may have the opportunity, based on possible repeat business with this agent, to have them bend their RULES, in hopes of apeasing you. This must be set up right from the get-go!
Good Luck…
JT - IN
Re: Urgent- can deposit be deemed non-refundable? - Posted by SueC
Posted by SueC on July 12, 2001 at 07:41:32:
Hi Ben,
Even if Dad puts down a deposit, why do you have to stop the eviction? Can’t you just ask for a continuance of any hearing?
The parties can agree to anything they want - I don’t see why a deposit HAS to be refundable. If you had a “no contingency” contract, the deposit would be non- refundable wouldn’t it? Obviously, and you probably know this, it would be “refundable” in the case of seller fraud or misrepresentation, but otherwise you should be able to set it up that way.
Also, if it’s a full purchase, in cash, why not ask Dad to put 25% down, or even the ENTIRE amount in escrow, with an escrow agent of your choice? What contingencies are in your purchase agreement to allow Dad to be able to back out? If there aren’t any, then if he doesn’t go through with the sale, the deposit is yours.
Ask for that, and you’ll know right away if he’s bluffing or if he’s serious. If he’s serious, there’s no reason he should object.
I’m not sure what you meant about “attorney review”, he wants his attorney to review what exactly? The docs? I wouldn’t stop the eviction for that, but like I said, maybe get a postponement for a week or ten days. Plus, he can buy it back right after the eviction if he wants, for the FMV plus legal costs, right?
Just some ideas off the top of my head.
Re: Urgent- can deposit be deemed non-refundable? - Posted by Al
Posted by Al on July 12, 2001 at 06:54:22:
Another reason for investors not to use relators, if you do not need to. Real Estate law? Whose Real Estate Law? Maybe its the relators law? Non-refundable deposits are used all the time in my state. I know of no Federal Law that prohibits them or any state, but you might want to check your state laws. Ask the relator whose law it is?
John Boy’s throwin 95 mph heaters again! - Posted by Ben (NJ)
Posted by Ben (NJ) on July 12, 2001 at 12:49:47:
I never want to sit on the other side of the table from you, John Boy (LOL). You don’t just play hardball, you throw heaters! Anyway, I have taken most of your advice, agent now has a non-refundable bank check made out to me, not the realtor, we merely postponed the eviction for one month since we have a 30 day closing date set. So even if dad flakes out, I will be in the same position in a month with $17,500
in my pocket. I can live with that. Thanks for the help!
Nice job… - Posted by Ben (NJ)
Posted by Ben (NJ) on July 12, 2001 at 12:22:13:
I’m at my beach house in Long Island on a dial-up laptop and can’t do any proper research from here (yes I am an attorney) so I thought I’d throw this out to the crowd. Thanks, now I’ve got some ammunition to hang my hat on.
Good Research Award to You (nt) - Posted by JT - IN
Posted by JT - IN on July 12, 2001 at 09:39:40:
$
Re: Urgent- can deposit be deemed non-refundable? - Posted by Ben (NJ)
Posted by Ben (NJ) on July 12, 2001 at 12:33:26:
Sue, in NJ there is a mandatory 3 day attorney review period where the buyer or seller basically has unfettered discretion to kill the deal. The agent is saying that my insistence on a non-refundable deposit
is in conflict with that 3 day kill period. I don’t agree. As Julia above stated, they can still kill the deal,(i.e I am precluded from enforcing the remedy of specific performance) BUT my remedy is to keep the deposit. You guys are right though I should have asked for alot more than 10%, but I have been laying on the beach for a week and a half and am entering brain death.
Re: John Boy’s throwin 95 mph heaters again! - Posted by phil fernandez
Posted by phil fernandez on July 12, 2001 at 18:10:39:
Either way you win. You just win more if the sale doesn’t go through as you have the $17,500 safely tucked away.
Nice job.
Thanks… - Posted by Julia
Posted by Julia on July 12, 2001 at 13:24:04:
for the compliment!
LI beach house, huh? Must be nice! Now I know who to send my NJ legal questions to!