In the resi world this nonrefundable deposit is often referred to as a “good faith” payment. Meaning, you’d better be trying your darndest to get financing for this property, because you’re taking up valuable time I could be using to find another buyer. Make sense? This is often why nowadays realtors or sellers won’t even show homes to people that don’t have a preapproval.
Agreeing with a previous post, this guy that wants to buy your property can’t “offer” it to someone else if he doesn’t own it or isn’t licensed to sell it. Although you may be right, and he may be trying to shop it to other investors to see if he’d get any bites. He may just be buying himself time at your expense.
Typically a purchase agreement is done, which is normal if the seller is serious about buying the property. This indicates an expiration date, and if the deal is not done by that date, you’re entitled to keep the deposit.
Time is money, and in this case it’s a perfect example. Don’t let him tie up your property for 60 days while he’s out on a witch hunt. You could easily be doing the same.
I have come to this website as a motivated seller and not as a R/E investor. I have a commercial property worth in the $500K range in which I operate a business that I really want to get out of because of personal reasons and not financial reasons. Yesterday an Investor offered $400K for my property and he wants to sign a contract to tie up my property for 60 days while he is acquiring financing. My problem is that I feel he potentially has no intention of buying the property but instead, I believe he wants to try and flip it. If he can not sell it, he would just cancel our contract with the clause that he could not obtain financing. Is it reasonable for me to ask for a non-refundable deposit in return for turning away all other potential buyers for such a long time. Thank You very much!
Re: other side of the tracks? - Posted by Glen SoCal
Posted by Glen SoCal on July 07, 2005 at 20:08:33:
Jill–
By this date you have probably moved on. If not, consider offering the
potential buyer an ‘option’ to buy your property instead of a contract
contingent upon financing. Price the option at an amount that makes
sense to you and high enough to reveal your potential buyer’s
commitment. The option may be renewed at the end of the option
period and you can collect another option fee and go another round.
Check with your attorney on this one. In IL if someone that is not a licensed real estate broker tried to do this deal it would be illegal since the potential buyer is not closed on the property they can not offer it for sale. Only an owner, real estate agent or someone with power of attorney can offer a property for sale.
Posted by Chris (WI) on June 19, 2005 at 21:20:53:
Jill,
Seeing that your post was at 2:30 in the morning I’d say this is weighing heavy on your mind. Personally, I would ask for a non-refundable deposit and I would ask the person if they intended to buy it if they can’t find someone to assign the contract to. Or accept his offer but insert a bump clause allowing you to continue to market the property. Do you operate the business that is in the building? Is the business staying/moving/closing? Does the lease payment cover the mortgage? Are you willing to offer seller financing? What type of building office, warehouse, manufacturing, restaurant, etc? Where in the country is this?
Chris,
I do operate the business but I do not enjoy it because of the long hours of the convenience store/take out restaurant that it is. The business does cover the mortgage payment; I just do not enjoy the business. The buyer has offered $15k as a deposit but how much do you think should be non-refundable? I have never heard of a bump clause, so could you please describe a how it could be worded. Thank you very much.
Re: other side of the tracks? - Posted by Chris (WI)
Posted by Chris (WI) on June 20, 2005 at 07:57:06:
Jill,
Maybe $5000 should be non-refundable. Just enough to Know he is serious about getting his financing and make him whince a bit if he doesn’t. A bump clause would be something like “Seller retains the right to continue marketing the property and accept another offer in place of the accepted buyers offer” Find an experiencied real estate attorney, it’ll cost a few hundred bucks and be well worth it.