![]() ![]() The truth of the matter is that the residential contract of sale is not really set up to accommodate delays and defaults. When the seller delays, the purchaser's schedule can be thrown out of kilter, and worse, he or she may lose a locked in interest rate. Similarly, the seller can be just as frustrating, if the seller has not found a place to live, has a planned vacation, is waiting for the school year to end or just isn't ready to pack up and leave. At a minimum, the seller is faced with additional carrying costs. Particularly if the seller is in the midst of a purchase transaction that is dependent upon the sale of his or her current residence, there can be a cascading pile up of woe waiting for the purchaser to commit to a closing date. After all the ups and downs of a typical closing, when the purchaser plays games over the closing date, the seller is driven to the brink. ![]() Finally, the purchaser will use all means available to delay agreement on a closing date. Slowing down the completion of the loan clearance process is another tool that the remorseful purchaser will use to delay the inevitable. This maneuver can easily delay the closing date by a number of weeks. In one typical situation, the purchaser will drag his or her feet submitting the Board package. When a party ultimately intends to close, but delays the closing for an unreasonable period of time, the options are quite limited. At the end of the day, once the seller is forced to commence a lawsuit to obtain the deposit, the full deposit paid by the purchaser will never be obtained by the seller, as the cost of the litigation will offset even a complete recovery of the deposit. That being said, since a seller can't obtain the deposit without working out a settlement with the purchaser, if the purchaser refuses to cooperate, the seller may have no choice but to commence a lawsuit. ![]() Sometimes emotions run so high when a purchaser walks away, that more good money gets thrown after bad and litigation ensues. Since the cost of contract deposit litigation can be the equivalent of throwing cash out a window, unless there is a very large deposit, the parties usually determine that settlement is best. Once that demand is made and the purchaser notifies the escrowee (almost always the seller's attorney), not to release the deposit, the parties are at a stalemate until a settlement is reached or until one of the parties commences an action to determine which party is entitled to the deposit. ![]() Those provisions will require the seller to demand the release of the contract deposit. Except in those rare situations where the closing date is "time is of the essence," and the purchaser fails or refuses to close, even if the purchaser willfully defaults, the seller will be subject to the escrow provisions of the contract of sale. One of the great misconceptions about a defaulting purchaser is that the seller can automatically keep the deposit once the purchaser is unable to close. When that happens, the seller will have to decide whether "contract deposit litigation" is cost effective. There are those times when the purchaser's financing evaporates or the purchaser just decides not to go forward. And then there's the defaulting purchaser. ![]()
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