House in escrow – when can I sign rental lease?

[NotCranky]

Very good point gn. I wonder if the listing agent at least tried to get back-up offers? I also feel guilty of playing a game of armchair quarterback!

[SD Realtor]

TemekuT – In the event of any default, there really is no such thing as an irrevocable deposit. That is not to say I haven’t seen cases where sellers didn’t keep deposit money that exceeded the actual damages they incurred due to the default. I agree with you, and frequently do (as I did with the escrow described above) demand that the earnest money be conveyed to the seller upon release of contingencies and that it be non-refundable.

Now the reality of the situation is that if there is a default and the seller keeps earnest money, the seller is really entitled to only keep money to cover real damages incurred. So as a seller you need to be able to prove that the monies kept are for realized loss or expense incurred. Again, most buyers don’t know it or have the wherewithall to fight it in court. This is the case even if in the contract you specified that the deposit is not refundable and even if it has already been conveyed to the seller. Again, most buyers don’t know or understand this.

Rustico – True there has been no failure to perform. My advice was to insulate the seller against additional expense incurred in the case of a late closing. If closing day comes and the buyer cannot perform it is well to late to try to push an ammendment through at that time to get compensated. If you wait until then you will not get anything. Also if the contingency period has already passed there is no risk at all to try to establish this ammendment. There is not any way for the seller or the listing agent to get any insight into the progress at the lender. Lenders will not even talk to anyone except the mortgage broker. So, if you 100% trust the mortgage broker then okay, don’t do anything, yet I don’t trust most mortgage brokers so I would advise to do whatever possible I can to insulate yourself from their behavior.

SD Realtor

[SD Realtor]

TemekuT – In the event of any default, there really is no such thing as an irrevocable deposit. That is not to say I haven’t seen cases where sellers didn’t keep deposit money that exceeded the actual damages they incurred due to the default. I agree with you, and frequently do (as I did with the escrow described above) demand that the earnest money be conveyed to the seller upon release of contingencies and that it be non-refundable.

Now the reality of the situation is that if there is a default and the seller keeps earnest money, the seller is really entitled to only keep money to cover real damages incurred. So as a seller you need to be able to prove that the monies kept are for realized loss or expense incurred. Again, most buyers don’t know it or have the wherewithall to fight it in court. This is the case even if in the contract you specified that the deposit is not refundable and even if it has already been conveyed to the seller. Again, most buyers don’t know or understand this.

Rustico – True there has been no failure to perform. My advice was to insulate the seller against additional expense incurred in the case of a late closing. If closing day comes and the buyer cannot perform it is well to late to try to push an ammendment through at that time to get compensated. If you wait until then you will not get anything. Also if the contingency period has already passed there is no risk at all to try to establish this ammendment. There is not any way for the seller or the listing agent to get any insight into the progress at the lender. Lenders will not even talk to anyone except the mortgage broker. So, if you 100% trust the mortgage broker then okay, don’t do anything, yet I don’t trust most mortgage brokers so I would advise to do whatever possible I can to insulate yourself from their behavior.

SD Realtor

[TemekuT]

SD Realtor – I agree with you and you are correct about the earnest money and default and the cost and hassle factor of a legal battle. The fact is that Escrow companies cannot release a deposit in the event of default unless all parties to the contract sign a release.

What I should have added to my post and made clear because of the facts of Tone’s situation is that taking the step of requesting the irrevocable release is a way of putting the Buyer’s “feet to the fire”. A financially weak buyer would panic and run, which in this market would be a blessing in disguise as Tone wouldn’t waste precious days or weeks waiting for the buyer to perform while the market dropped even more. This irrevocable deposit addendum request is a technique used to get a laggard buyer and agent to perform or get out.

Having said that, we know it is easy to get out of a purchase by suddenly having (engineering) a “financial situation” that would preclude qualifying or prevent proceeding, no matter how close to closing you are, and it is almost impossible to get any amount of damages if the buyer wants to fight it. The same applies for damages for a late closing.

[TemekuT]

SD Realtor – I agree with you and you are correct about the earnest money and default and the cost and hassle factor of a legal battle. The fact is that Escrow companies cannot release a deposit in the event of default unless all parties to the contract sign a release.

What I should have added to my post and made clear because of the facts of Tone’s situation is that taking the step of requesting the irrevocable release is a way of putting the Buyer’s “feet to the fire”. A financially weak buyer would panic and run, which in this market would be a blessing in disguise as Tone wouldn’t waste precious days or weeks waiting for the buyer to perform while the market dropped even more. This irrevocable deposit addendum request is a technique used to get a laggard buyer and agent to perform or get out.

Having said that, we know it is easy to get out of a purchase by suddenly having (engineering) a “financial situation” that would preclude qualifying or prevent proceeding, no matter how close to closing you are, and it is almost impossible to get any amount of damages if the buyer wants to fight it. The same applies for damages for a late closing.

[SD Realtor]

Temek your strategy is quite sound. Couldn’t agree more.

SD Realtor

[SD Realtor]

Temek your strategy is quite sound. Couldn’t agree more.

SD Realtor

[sdrealtor]

Nice to see you all bandying about some of the issues we all deal with on a regular basis. Hope lots are reading this thread to see that it not as simple as the 3 P’s. (put a sign in the ground, put it in the mls and pray).

[sdrealtor]

Nice to see you all bandying about some of the issues we all deal with on a regular basis. Hope lots are reading this thread to see that it not as simple as the 3 P’s. (put a sign in the ground, put it in the mls and pray).

[Tone]

Great discussion. I’m learning alot. 🙂

We’ll see what happens Monday or Tuesday – whether the contingencies clear or not. I’m going to delay signing the lease until Tuesday evening but I’m not so worried about that now since the worst I’ll lose is one month’s rent (it’s a gamble but I’ve spent more in Vegas for a weekend). I really need the peace of mind knowing I have somewhere to stay should my mortgage journey turn tortuous.

However, if the buyer fails to perform by Tuesday, I will definately request I be compensated for all damages should the escrow close late (PITI especially). I’ll also request the earnest money release should the buyer drop out. I hope I don’t scare them off, but as was mentioned earlier, perhaps that’s a good thing.

As for the bidding war I mentioned earlier – I had three offers. Two buyers came in with 100% financing and one buyer’s offer was contingent on a house selling. That house fell out of escrow (loan didn’t fund) and they withdrew their offer. From the two one hundred percenters, one had a higher FICO score, was 15 k under asking price, and my agent didn’t know the broker. The one I went with had the lower FICO score, but the offer was full price, and my agent knew the broker. The escrow was only 25 days as well. So we went with the later. The former verbally agreed to be a back up, but they never signed the official back up offer.

I’ll post updates if anyone’s interested — or even if you aren’t 😉

[Tone]

Great discussion. I’m learning alot. 🙂

We’ll see what happens Monday or Tuesday – whether the contingencies clear or not. I’m going to delay signing the lease until Tuesday evening but I’m not so worried about that now since the worst I’ll lose is one month’s rent (it’s a gamble but I’ve spent more in Vegas for a weekend). I really need the peace of mind knowing I have somewhere to stay should my mortgage journey turn tortuous.

However, if the buyer fails to perform by Tuesday, I will definately request I be compensated for all damages should the escrow close late (PITI especially). I’ll also request the earnest money release should the buyer drop out. I hope I don’t scare them off, but as was mentioned earlier, perhaps that’s a good thing.

As for the bidding war I mentioned earlier – I had three offers. Two buyers came in with 100% financing and one buyer’s offer was contingent on a house selling. That house fell out of escrow (loan didn’t fund) and they withdrew their offer. From the two one hundred percenters, one had a higher FICO score, was 15 k under asking price, and my agent didn’t know the broker. The one I went with had the lower FICO score, but the offer was full price, and my agent knew the broker. The escrow was only 25 days as well. So we went with the later. The former verbally agreed to be a back up, but they never signed the official back up offer.

I’ll post updates if anyone’s interested — or even if you aren’t 😉

[El Jefe]

I frequently will add a clause to my contracts similar to the “72 hour clause” giving me the right to continue to market the property not only until all contingencies are removed, but until all earnest money has been released from escrow. IMHO, earnest money is a bunch of BS as the buyer can delay signing the release almost indefinately, and the agents will come up with some whoppers of excuses as to why it hasn’t been done. You say you had a bidding war on your hands, you are in a position of power here. Send 1 notice to perform, if you don’t get results in a day or two, ammend the contract to add a 72 hour clause requiring the buyer to drop contingencies and release all earnest money, and then start fielding offers. If the buyers agent is hungry they will march the buyer down to the escrow office and put the pen in their hand.

[El Jefe]

I frequently will add a clause to my contracts similar to the “72 hour clause” giving me the right to continue to market the property not only until all contingencies are removed, but until all earnest money has been released from escrow. IMHO, earnest money is a bunch of BS as the buyer can delay signing the release almost indefinately, and the agents will come up with some whoppers of excuses as to why it hasn’t been done. You say you had a bidding war on your hands, you are in a position of power here. Send 1 notice to perform, if you don’t get results in a day or two, ammend the contract to add a 72 hour clause requiring the buyer to drop contingencies and release all earnest money, and then start fielding offers. If the buyers agent is hungry they will march the buyer down to the escrow office and put the pen in their hand.

[what_a_disasta]

If you see a decent rental at a good price then you’d better grab it. I’ve been looking through craigslist listings for a few months and the good ones arent cheap at all and go quickly too.

[what_a_disasta]

If you see a decent rental at a good price then you’d better grab it. I’ve been looking through craigslist listings for a few months and the good ones arent cheap at all and go quickly too.

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