My neighbor’s house was recently contracted and was due to close last week, but we found out that this did not happen. Apparently, about a week before closing, they were notified by their real estate agent that the house had not estimated the price at which they were contracted. The buyers did not want to get another mortgage company or get a new appraisal, even if our neighbor paid for a new appraisal. We were very surprised, as was our neighbor, to learn that the buyer did not even lose the deposit. I thought if the buyer doesn’t close, they will lose the deposit? If the buyer doesn’t close, but he still gets his deposit back, why do you have a deposit in the contract at all?
The story you described happens more often than you think, and the question “what happened to the deposit?” the question will almost always follow! Unfortunately, “what happened to the deposit?” The answer is always very disappointing for the seller, and it usually comes as a big surprise that not only does he not keep it, but will be returned to the buyer. Sellers, beware: In Colorado, a deposit doesn’t mean what you think. I think you are asking a great question: “Why do we have the makings at all?” The deposit is generally considered bona fide money, which the buyer usually provides to the seller when he submits the purchase contract. If the buyer and seller agree on a contract, then the deposit must remain in the hands of the real estate broker or title company until closure. When things are going smoothly (most of the time), this deposit is used as part of the buyer’s funds at the close. This is when things don’t go very smoothly … in a rush they can get complicated! Let me be clear about one thing about the deposit and real estate contracts in Colorado, and as I understand it, this is a good rule of thumb to use if the buyer’s actions are not egregious and ALL contingency times and deadlines are not specified in the contract. the passed buyer will almost ALWAYS get the deposit back!
Real estate contracts in Colorado come with a basic premise of protecting the buyer and giving the buyer ample opportunity to find out exactly what they are buying and how they are going to get the funds to buy. Buyers usually contract for the home they like. They imagine raising their family there, hosting weddings, proms, Thanksgiving dinners and Christmas parties under the tree in their new home. Buyers usually contract for homes they like, and when that doesn’t work, they get very frustrated as well.
Also, keep in mind that when something doesn’t work out, it’s usually not the buyer’s fault or anyone’s fault. Any real estate transaction has many moving parts, especially those associated with a loan, and there are many opportunities to face “obstacles” and sometimes these “obstacles” are too many to overcome.
The moral of the story is not to be surprised, as a salesperson, when you can’t keep the deposit if your transaction doesn’t see the closing table. Roughly the only time a seller will receive a deposit is when ALL contract dates and deadlines have passed and the only remaining date is the closing date. If the buyers come back after all the deadlines have passed, then they are likely to lose their makings! We hope you never have to ask the question, “Who has a deposit?” but if you do it even now, you will know the answer even before you ask!