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LAURA FOWLER HAS MOVED! To learn more about her new law practice, The Fowler Law Firm PC, please visit our website at www.thefowlerlawfirm.com. The Fowler Law Firm PC will continue to provide TREC approved continuing education and representation of Keller Williams agents under a Risk Management program designed by your team leaders for your benefit. Please note our new contact information:
919 Congress Avenue
Suite 1150
Austin, Texas 78701
Tel: (512) 441-1411
Fax: (512) 441-1410
www.thefowlerlawfirm.com
lfowler@thefowlerlawfirm.com
Lately, with some of the challenges buyers are facing with third party financing, buyers can't close. They timely deposit their earnest money, they provide other assurances such as a pre-qualification letter, but then they are unable to obtain financing. If the buyer simply agrees to authorize the title company or other escrow officer to release to the seller the earnest money the buyer deposited, rarely is there any conflict. But if instead, the buyer requests more time or refuses to agree to allow the title company to pay to the Seller the funds, if you represent the Seller, you most likely have a very unhappy seller. So what do you do?
The toughest call in the current market is deciding whether to require a larger earnest money payment or tougher language about failure of third party financing resulting in the seller being absolutely entitled to the earnest money. If you don't know what to do, make certain you talk to your team leader. There are many ways to write a purchase money contract that will absolutely guarantee that if the buyer fails to obtain financing within a certain number of days, he will forfeit his earnest money payment. How to word that is beyond the scope of this article. But rest assured, if you use strong language you may have an angry seller who feels your wording lost him his sale. The time to talk to your seller about all this is before anyone has made an offer. Asking questions like, "How important is it to you to be sure the offer you accept is one that really is going to fund?" is a good starting point for a discussion, particularly in the current market.
When and if the buyer who has deposited earnest money with an escrow officer fails to obtain financing or for other reasons is unable to perform, if the purchase money contract is properly written, the Seller has an absolute right to receive all the earnest money deposited by the Buyer. Sometimes, the buyer does not want that to happen. When the seller asks for the earnest money and the buyer refuses, do not expect the escrow officer to give the seller the buyer's deposit, even if the buyer failed to perform and even if both the purchase money contract and the law that governs such transactions is very clear. It simply is not the duty or even the right of the escrow officer or Title Company to decide who is entitled to the funds. Expect the title company to turn to the seller and say, "When you have a release from the buyer or an order from a court of competent jurisdiction ordering the release of the funds, they will be released."
If you learn prior to the date scheduled for closing that the Buyer is not going to be able to close due to an inability to obtain third party financing, do not agree to postpone the closing date and do not fail to show up. Either one gives the buyer more time and weakens the seller's position. Go with your seller to the closing and insist that your presence be noted in writing.
So what do you do with a Seller who is by now probably furious about all of this? Well, first you take a deep breath and remind him of the discussion you had several weeks before, at which time he told you whether it was truly important to not accept an offer from a buyer who might not be able to get financing. Then you contact the buyer's agent (never the buyer directly) and tell the buyer's agent your next step is going to be to refer your seller to counsel with competence in this area of the law who will seek money damages, interest and attorney's fees for all the time that the buyer continues to refuse to allow the escrow officers to release the earnest money deposit to the Seller.
While this often works, if it doesn't, and if indeed the Seller in all things was ready and able to perform at the time of closing, meaning had the ability to convey the title promised, then encourage the Seller to retain legal counsel to at least make a written demand. This usually solves the dispute with a telephone call and a letter.
We hope every closing closes for your sellers, but keep these thoughts in mind if they don't. In your every professional adventure, we wish you the very best.
Ms. Fowler will be speaking several times each month on Risk Management Topics that your team leaders and Education Committee suggest. For more information on these courses, please contact your team leader or Stephanie Cagniart, The Fowler Law Firm's Director of Electronic Publications. |
This information is provided by Laura S. Fowler, Attorney at Law with The Fowler Law Firm PC. It is not intended as a substitute for careful review by legal counsel of your choosing. We would be most honored to assist you in your every real legal need.
Contact Laura Fowler at lfowler@thefowlerlawfirm.com
or call (512) 441-1411.
As with any legal issues, please consult your attorney with questions.
