Deposit on an Offer when dealing with a private seller

[VicChung]

Hello Everyone,

When we make offers in real estate, we have to make a deposit to secure the offer that goes in the realtor`s trust account (i.e., re/max or other). When dealing with realtors, the parties have to abide to a code of ethics and return the money even if the deal did not go through.

However, the question is when dealing with sales by owner, where should the owner keep the deposit until conditions are removed?

If the owner deposits the money in his own bank account, how can the buyer GUARANTEE that he gets the money back if he decides not to remove conditions? Is going to court the only alternative? How can the buyer protect his deposit?

Thanks, Vic

 

[PaulPoulsen]

Hi Vic;

Write the cheque to your lawyer in trust. I definitely would not give the seller a deposit in his/her name. It could be a recipe for disaster.

 

[rforgiel]

Vic,

I agree with Paul`s advice. Make the deposit out to your lawyer in trust. I even do this on deals that are going through a Realtor. Your lawyer having it saves a lot of headaches.

 

[Mitch Collins]

There is only one issue with having the offeror`s lawyer hold the deposit -

The lawyer, unless he expressely underwrites to all parties to the contract, does not act as a stakeholder, and can therefore return the deposit to the offeror at any time - potentially leaving the offeror open to litigation from the vendor. In an agency agreement, if you give the deposit to the Brokerage (aka your realtor) they automatically act as a stakeholder and thus cannot arbitrarily release the deposit to you.

Pretty rare, but by law all parties to a contract of purchase and sale have to sign that the deposit can be released to the offeror.

I just learned about this myself - taking the RE trading services course from UBC.

Just thought I`d throw that out there - there has been some lawsuits over this exact issue of deposits!

But definately do not give the vendor the deposit personally like that! I did that at the beginning of my RE career, and I`m just lucky that I didn`t get slapped for it!

 

[VicChung]

QUOTE (MitchCollins @ Mar 30 2009, 10:18 AM) There is only one issue with having the offeror`s lawyer hold the deposit -

The lawyer, unless he expressely underwrites to all parties to the contract, does not act as a stakeholder, and can therefore return the deposit to the offeror at any time - potentially leaving the offeror open to litigation from the vendor. In an agency agreement, if you give the deposit to the Brokerage (aka your realtor) they automatically act as a stakeholder and thus cannot arbitrarily release the deposit to you.

Pretty rare, but by law all parties to a contract of purchase and sale have to sign that the deposit can be released to the offeror.

I just learned about this myself - taking the RE trading services course from UBC.

Just thought I`d throw that out there - there has been some lawsuits over this exact issue of deposits!

But definately do not give the vendor the deposit personally like that! I did that at the beginning of my RE career, and I`m just lucky that I didn`t get slapped for it!


Thanks everyone. If you were a seller, would you feel confident that the deal will go through if the buyer deposited the money to his own lawyer in trust? How does the buyer assure the seller that he is legitimate and will go through?

 

[invst4profit]

Have the sellers lawyer contact the buyers lawyer. If the sellers own lawyer is not able to convince the seller the deal is good you may be wasting your time with the deal.
In the case of a "sale by owner" they need to be prepared to do business or they will never find a suitable buyer.

 

[VicChung]

QUOTE (invst4profit @ Mar 30 2009, 11:43 AM) Have the sellers lawyer contact the buyers lawyer. If the sellers own lawyer is not able to convince the seller the deal is good you may be wasting your time with the deal.
In the case of a "sale by owner" they need to be prepared to do business or they will never find a suitable buyer.


What`s the $$ cost of having the cheque deposited in trust in your lawyer`s account?