If the seller won't make these repairs what happens to my Earnest Money?

For the most part when I have buyers send over a request for repairs after an inspection some type of negotiation takes place.  Sometimes repairs are completed by the seller, sometimes the seller agrees to pay X amount of buyer closing costs so buyer can use money he'd planned on paying closing costs with to make repairs after closing and sometimes the price of the home is reduced to a new amount.

But for that once in a while... when the repairs become the deal breaker... what happens to the earnest money.

Well in Georgia we have a due diligence period in our contract.

That period is a negotiated number of days.  As a rule I suggest buyers ask for at least two weeks.  Sometimes in my market it can be a week before you can get inspections done and the inspector might suggest a second look by certain professionals depending on what they find.  Sometimes you'll need a roofer, an electrician, a plumber or even a HVAC company to address something that might need a more in depth look. 

If within this due diligence period a resolution can not be reached by the buyer and the seller... 

Then if you read 8 d. (2) you will find the buyer gets to determine in this time period if they will exercise their "OPTION" to proceed or not with the purchase of the property. A buyer may unilaterally terminate the contract during this time period. If a buyer does that they are entitled to a full return of their earnest money deposit and the seller can't prevent that. 

So if a seller refuses to make repairs that a buyer wants made if that happens in the due diligence period you'll be getting your earnest money refunded. If that period is over there are still certainly times it can be returned, but not always.  If you also have a loan contingency and the loan will not be issued without the repairs you may also terminate and get your earnest money returned with a letter of denial from the lender. 

If the period has passed for all contingencies in the contract it is time for you to consult legal advice from a real estate attorney.  A buyer who doesn't close and has no legal contractual out may be subject to being sued by a seller for specific performance. But at that point the decision to buy or not buy for a purchaser must be carefully weighed with risk if the seller won't agree to terminate. That risk should always be discussed with legal counsel and this blog is not meant to serve as legal advice, only as a suggestion that at that point you should certainly get some legal advice.

 

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Comment balloon 5 commentsTammy Lankford, • June 10 2017 08:10PM

Comments

Hi Tammy! Great blog! Sometimes the repairs cannot be negotiated. I had a transaction earlier this year where the roof had clear hail damage and needed replacement.  The sellers' insurance company refused, but the sellers, too, came to the conclusion the roof needed replacing.  The listing agent said sellers would replace, but the price must be increased $5000 for "added value".  Buyer found another home (nicer in my opinion) for less money!  Everything works out as it should!

Posted by Sonja Patterson, Texas Monthly 5-Star Realtor Recipient for the Hou (Executive Real Estate Services) 17 days ago

Good reminder of the importance of setting "reasonable" time frames with-in our contracts Tammy Lankford, . A good agent should be well are of each contingency and when they expire through out the contract.

Posted by Bob "RealMan" Timm, Bob Timm Owner/Broker National Marketing Realtors (National Marketing Realtors) 16 days ago

Good evening Tammy. This is clear and concise and explains your process well.

Posted by Sheila Anderson, The Real Estate Whisperer Who Listens 732-715-1133 (Referral Group Incorporated) 16 days ago

This is a good explanation of the process in your area!

Posted by Kat Palmiotti, The House Kat (Grand Lux Realty, 914-419-0270, kat@thehousekat.com) 16 days ago

Sonja Patterson I totally agree that many times things work out just they way they are are supposed to and sometimes you just can't make someone see reason. I've seen sellers cut off their nose to spite their face over principle and still be making payments on that home 6 months later... yeah they saved money.

Bob "RealMan" Timm we actually use a form for that too.

Sheila Anderson and hopefully I can send a link to it when I get to that point in the negotiations so everyone will understand.

Kat Palmiotti thanks.  I know I'll be emailing links to this blog left and right until this changes in our contracts.

Posted by Tammy Lankford,, Broker GA Lake Sinclair/Eatonton/Milledgeville (Lane Realty Eatonton, GA Lake Sinclair, Milledgeville, 706-485-9668) 15 days ago

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