Thursday, November 7, 2019 / by Heather Schelling
These five things will stop a house sale in its tracks. Contracts can be broken – who pays for damages?
1. Earnest money is the buyers’ good-will deposit that lets the seller know how much the buyers are willing to risk in the event of a breach. It’s a down payment that shows the seller that you’re serious. That deposit will go towards the buyers’ closing costs which usually run about 3% of the purchase price. In Washington state, earnest money is due within two business days of mutual acceptance. You may elect to give it to your Realtor. If so, they must provide a receipt to you and they now have 3 more business days to deliver to the escrow office. If not delivered in time, the seller must be notified immediately. They have the contractual right to terminate the agreement. It’s considered a voidable contract up until the point that the earnest money is received.
2. If the buyer elects to hire an inspector for a home inspection, they may ask for specific repairs, a price reduction, specific performance or all of the above. The seller may not agree to any requests. After a formal process, both parties may not be able to come to terms with anything that the buyer requests. If not, the buyer can void the contract and keep their earnest money (if said notice is delivered on time).
3. If the buyer is obtaining a loan to purchase your home, it’s likely that their lender will request an appraisal report to be submitted by a licensed appraiser. In this circumstance, the appraiser is there to verify the value as stated in the contract. If not, they can assess a price lower than the agreed-upon contract price. If the buyer and seller cannot agree on a remedy, the contract is voided. If the response is timely, the buyer should be able to keep the earnest money.
4. If the buyer runs up a lot of debt after they’re approved for a loan and before the time of closing, it can alter their debt-to-income ratio. They could jeopardize their ability to qualify for their loan and therefore not be able to move forward on the purchase.
5. Buyers sometimes get cold feet right before it’s time to sign the final papers. They deposited their earnest money on time, negotiated with the sellers on any repairs, appraisal came in at value and they kept their credit clean but right before it’s time to sign, they back out of the contract. Some feel like they’re overpaying due to our crazy market, others have a bad vibe while some might feel overwhelmed at homeownership. Whatever the reason, the buyer would be in breach and would likely forfeit their earnest money to the sellers.
Make sure you discuss these issues with your Realtor so that you can get in front of them before they happen.
Until next time!Heather Schelling, Realtor®