Deposits and the Accepted Offer: When an offer is accepted by the sellers, the buyer must submit a deposit with the offer or, more typically, within 24 from acceptance as noted in the Offer to Purchase. Occasionally, however, the 24 hours expires and no deposit has been received by the listing brokerage. Occasionally the deposit arrives late and in some cases remains unpaid.
Whether late or unpaid, this is considered a simple breach under the contract, and does not necessarily nullify the offer to purchase. As the pre-printed portion reads the deposit is, “to be held in trust pending completion or other termination of this Agreement and to be credited toward the Purchase Price on completion.” It gives no remedy to the Sellers.
This places Sellers in a Precarious Position.
They have to move but due to the breach are uncertain whether the buyer will close the deal. In a good market other buyers might be waiting in the wings to purchase the home.
With the sellers’ inability to invalidate the offer, their options are weak. They can:
Ask for a release from the agreement which the buyer may not grant,
Wait and see whether the deal closes, or
Obtain a court order to terminate the contract, an action that could take longer than the days to closing.
The standard agreement does not address what would happen if no deposit is submitted. In an effort to clarify the deposit issue, the agreement as printed creates uncertainty, giving the sellers no option to set the offer aside by declaring it null and void. Who wants to deal with a rogue buyer who dishonors the contract?
So How Can this Predicament be Resolved?
Solutions can be written into the offer in a number of ways:
The sellers’ agent can insert a clause that makes the offer conditional on the seller’s brokerage receiving the deposit within the contractual time period; otherwise the offer becomes null and void. Beyond that point the parties can mutually agree to revive and extend the offer by an amendment in writing, without doubt on the basis that the buyer delivers a certified cheque with the amendment to be cashed and placed in trust.
Alternatively, the clause can be written so that the Sellers reserve the right to declare the offer null and void, by giving the buyer notice by email, fax or hand delivery.
Such clauses can further include a provision for the Seller to invalidate the offer if the deposit cheque delivered is NSF.
Such a contractual way out of a breach due to an unpaid deposit gives the sellers greater certainty and control and allows them to entertain offers from any other interested buyers. This is especially true in a seller’s market.