By James R. Hagerty
Special to RealEstateJournal
Question: I was due to close on the sale of my home in Port Richey, Fla., on Oct. 1, but the last of the four hurricanes that came through Florida hit here the day before the closing. My Florida room was totally destroyed and about 40% to 50% of the main roof on the house was ruined. The buyer saw the damage and backed out of the deal. She had made a $2,000 deposit to be held in escrow by an attorney and her title company.
I told the woman the damage would be fixed and paid for by my insurance, but she still refused to complete the sale. I have been waiting to see whether the attorney will release the deposit to me because the buyer has refused to complete the sale. The attorney has sent the buyer notices about the deposit, but the buyer is not responding to her mail and the attorney can't release the money unless the buyer responds. Can this deposit be given to me now? I think the buyer is ignoring the situation so the deposit can't be released.
-- Marie, Port Richey, Fla.
Marie: The attorney must determine whether there is a dispute between the two parties over the deposit, according to Joe Boyd, a real-estate lawyer at Boyd, Lindsey & Sliger in Tallahassee, Fla. Typically, the attorney would write to both parties to ask them for their positions on the matter. If there is a dispute, he says, the attorney would make a filing with a local court and the two parties would have to "duke it out" there. Legal fees would eat up much of the money in your case.
If the other party doesn't object to your claim of the deposit, the attorney can award it to you. If the other party doesn't respond to the attorney's letter within a reasonable time, the attorney may conclude that the other party isn't disputing your claim. Mr. Boyd says there is no statutory definition of how much time the parties have to respond, so that would be a matter of judgment.
More and more people are backing out of purchases, real-estate agents say. How can sellers reduce the risk of being jilted on the eve of the closing?
There is no way to eliminate the risk that buyers will flee, but "you can make it painful for them to do so," says Valerie Torelli, who owns Torelli Realty in Costa Mesa, Calif.
Here are some tips from Ms. Torelli and other experienced real-estate agents:
- Be frank from the beginning about any problems with the house or the neighborhood that might worry potential buyers. Reduce the possibility for last-minute surprises and disputes.
- Don't waste your time negotiating with a buyer unless he or she seems genuinely excited about the home. If someone seems hesitant, "go on to the next buyer," advises Ms. Torelli. A good real-estate agent should be able to help you pick up the indecisive signals emitted by a buyer prone to second and third thoughts. One obvious clue: They're still looking at other homes.
- If you have a choice of buyers, go with the one who is better financed and more determined to get the deal done, even if that means accepting a slightly lower price.
- Ask for a substantial deposit to be placed in escrow. Ms. Torelli likes to see at least 3% of the purchase price. Ruth Golley, associate broker at RE/MAX Executives in Decatur, Ga., says 1% is more common in her area, though some sellers seek 2%.
- Limit the time available for an inspection and other information-gathering. In California, 17 days is the typical limit, Ms. Torelli says. Diane Saatchi, a regional vice president for the Corcoran Group in East Hampton, N.Y., goes further. She advises sellers not to sign a sales contract until the potential buyer has done the inspection and lined up financing. Making a deal contingent on the buyer's ability to get a mortgage is a "totally bizarre concept," Ms. Saatchi says. "Why should I take a risk on your finances when you know your finances and I don't?"
- Stipulate in the contract that a certain portion of the deposit automatically will be paid to the seller on a nonrefundable basis once certain contingencies, such as the inspection, are removed.
Note to readers: For a forthcoming article, I'd like to talk to people who have used LendingTree.com or other online services that offer a monetary incentive if you use an agent or broker recommended by them. Please email me at bob.hagerty@wsj.com.
-- Mr. Hagerty is a staff reporter for The Wall Street Journal. His "House Talk" column appears most Fridays on RealEstateJournal.com. E-mail him your questions about the residential real-estate market. Please include your first name and city and state. If your question is answered and posted, we will show your first name and city. Due to volume of mail received, we regret that we cannot answer every question.
