From what you're saying they don't have a contingency in the contract to sell their home, but they most likely do have a contingency in the contract for them to obtain financing. Since they have sold their previous home but haven't closed on it yet, they're having problems obtaining financing. If this scenario is correct, I doubt seriously that you have a right to keep their earnest money. On the other hand if there is no financing contingency in the contract either, you MAY have a case for keeping the earnest money. I think I'd try working through this problem with the buyers, make sure communication is good between you and your agent and their agent, keep abreast of the continuing situation. You may be better off keeping these buyers and closing a few weeks later then re listing the house and looking for new buyers.

Amen.

Tricia

PS There-there, deep cleansing breathes. Everything will turn-out OK in the end. One day, you'll look back & say, "Oh my, remember when our house didn't close!"

In other words, even if there is no contingency in the contract, if the buyers need to sell their current home in order to obtain financing, then there is an invisible contingency anyway.

Your agent should have told you about this.

I sold FSBO and had a similar situation. The buyers were willing to take the contingency to sell their home off the contract because I had an issue with it. But I knew they still needed to sell their home in order to qualify to buy my home. To top it off, they wanted closing to occur 80 days after contract signing. Their home was under contract to sell in 80 days.

I knew that if their sale fell through, that I was out of luck. So (dumb ole FSBO that I am), instead I contacted another very interested buyer and said that I had an offer on the home and asked if they were interested in making an offer before the home was off the market. This new buyer made a better offer and there they did not have to sell a home and it closed in 30 days.

This doesn't help your situation, but it explains that agents need to explain more to their customers about all the possible "what ifs".

Now you need to push to get these folks to get a bridge loan asap so they could close on your place asap, regardless if their sale occurs. Give them 5 days for a bridge loan commitment and then put the home back on the market if they don't work out. Can you keep the earnest money? Sure would be nice. Push for the bridge loan first.

I would like to hear what other agents have done regarding earnest money return when situations like this arose before. It sure sounds like a common situation.

In other words, even if there is no contingency in the contract, if the buyers need to sell their current home in order to obtain financing, then there is an invisible contingency anyway.

This is correct. Your agent should have asked your buyer's agent if they would be able to close on time even if the sale of their home was delayed. I don't know how experienced your agent is, but this points out why experience is so important.

Thanks for your responses. Truly, we don't want to keep the earnest money.... a few $K is nothing when it comes to keeping people happy with each other in a business deal this important to us, we think. And these are really nice people buying our home. We like our RE too.... the only person we're not happy with is our buyer's buyer. ^_^ If we could keep HIS earnest money, that'd make me happy.

I hadn't heard of a financial contingency, but it makes sense. I mean, if you don't have the money to buy a house, you can't buy the house, no matter how much we may want them to.

A bridge loan, that's what it's called? I think that's what they're trying to arrange. We'll see what Monday brings. I'll keep ya posted. Thanks everyone.

SheltieMom:

First: Pat, pat, pat on your shoulders, I think this will work out satisfactorily in the long run.

My strongest evidence for that is your statement:

(quote): "Truly, we don't want to keep the earnest money.... a few $K is nothing when it comes to keeping people happy with each other in a business deal this important to us, we think. "

You've got a clear understanding of what's truly important and that's more than half the battle. Hopefully your attitude will be contagious across the whole deal (even extending to the your buyer's buyer).

A bridge loan will do the trick, though obviously increasing somebody's costs a bit. Since your buyers already have a contract on their house (albeit with troublesome purchasers) I think it won't be hard to arrange one. Bridge loans sound like a big, iffy, deal, but all lenders really want to see the transactions close, because that's how they make their money. And bridge loans are often needed to get you from here to there.

(And it might even prove useful for them in stemming the tide of further requests for additional work from their buyers. They can truthfully point to bridge loan to make the point of how hard they have worked to keep the deals alive and how the wall has now been reached.)
Good Luck!

Molly~

The house we sold in November (after the first buyer disappeared and we had to re-list) - it closed late by several days and we had already moved to a different state. That was nerve-wracking - was supposed to close on the 15th, we moved on the 18th, and finally closed on the 21st, 2 days before Thanksgiving. Getting the phone call from the escrow company that the deal was done and recorded was the best thing I'd heard in a long time! We never did find out what the hold-up was - buyer's realtor wasn't taking the papers to the escrow company - no one seemed to know why - their realtor would hang up on ours when he called! Our realtor did put our house back into "Active" status as a way to light a fire under the other realtor's bum.

I think you're right to try to work with these people. They're probably trying as hard as they can to get things fixed on their end. Good luck on Monday's news!

I wonder if you wish you'd accepted their higher "contingency" offer? You'd be in the exact same spot, but you'd be getting more money for it.

If the offer had NO contingencies, not even a financing one (or, perhaps none but an inspection contingency), that would be worth a lower price.

But I'm not so sure it's worth a lower price to remove the "sell my house" contingency if there's also a financing contingency, if it amounts to essentially the same thing.

And if it took that long to get an offer, and the offer was lower, then definitely you are right to work w/ these people.

IMO..communcate directly with your buyer to have this clarified in order that you can make your decisions based upon the facts...as you can no longer trust your RE agents version of things...

That said, if you choose to move forward, IMO, the RE agent should be held accountable for her error...as this was a gross misrepresentaiton on her part...ESPECIALLY since she knew that you had rejected the buyer's first offer because of the contingency....in part based upon HER advice....it is difficult to belive that she was unaware of the fact that a contingency still existed.

I'm not sure you can legally hold the RE agent accountable in any financial way.

Most RE agents have forms, etc., that repeatedly say, "I am not giving any legal advice." For just this reason.

Of course you can certainly blame her--but there won't be any way to make her pay for anything out of it.

Conditional on the sale and successful closing of a previous home and the standard financial contingency clause, are 2 separate contingencies, both should have contingency dates in the contract.
In the absence of buyer notification to the seller to terminate the contract on or before the contingency dates, the buyers earnest money is at risk.
That's how it works here.

We double checked the contract.... there isn't even a financial contingency listed in it. Our agent has 20+ years experience, all in our old town, so I don't know why she didn't have our buyers prepare financing in advance in case their buyer flaked out, to have the "no contingency" thing airtight.

Our buyers are trying to get a bridge loan, or a home equity loan, and we'll see tomorrow if anything new happens (our agent has been out of town through all of this, so doesn't know the whole scoop and won't until tomorrow). There's also another potential buyer for our buyer's home.... a guy who was interested before the buyer's house went on the market, got prequalified, but then didn't take any further action because things were moving too fast for him. Agent is going to see if he's still interested in their house.

If either of those don't pan out, we'll address the earnest money issue.

I just didn't think this would happen, or that it could. I'm disappointed, I'm upset. I don't know what to say to our agent, other than simply, "How did this happen, when you said 'don't ever accept a contingency offer', because things like this happen?" But, this deal might still work, so there's no point in jumping up and down and yelling, like some relatives have advised me to do! :P

"I wonder if you wish you'd accepted their higher "contingency" offer? You'd be in the exact same spot, but you'd be getting more money for it."

Yes, DH and I were just saying the same thing!!!

Well, DH says not to be too worried about it going back on the market, should that happen.... we did get several offers in the two weeks it was on the market. People did love the house. Now if only they could pay for the house too.... ^_^

"We double checked the contract.... there isn't even a financial contingency listed in it. Our agent has 20+ years experience, all in our old town, so I don't know why she didn't have our buyers prepare financing in advance in case their buyer flaked out, to have the "no contingency" thing airtight."

Regardless of the reason (negligence or out and out pre-meditated deception) there is no excuse. If she carries E&O insurance...and if the deal does fall apart due to the RE agent's misrepresentation, you should put in a claim for any financial damages that you may incur.

If not, at the very least, she should be reported to the state board that licenses real estate agents as:

1) She did not even notify you of the problem for days.

2) YOU had to call HER to find out that she dropped the ball on the contingency issue.

3) Relayed the info to you as if it was a non-issue...even though she KNEW that this was in violation of the contract.

4) Insult to injury... she left town, leaving you to deal with the problems that she caused...and has not even bothered to keep in touch.

5) You still have no information regarding how and why she let this happen.

If you do manage to work this out, I would renegotiate her fee...as you were stuck cleaning up after her "mistake", and but for your efforts, the deal would most likely have fallen apart altogether. This is SUPPOSED to be what "earning the fee" is all about...that said, time for a discount.

After 20 years plus as an agent, it is extremely doubtful that she forgot her own aversion to contingencies...or that she forgot that this buyers first offer was rejected because of a contingency...which is documented by the contract. Yet, somehow she forgot all of this when the buyer presented an offer WITH a contingency in place....

That said, this occurance only further serves to prove that experience is meaningless with an agent that will pursue their own agenda over that of the seller and/or buyer....and, regardless of what the contract may or may not state...

This is just another example of why it is best to hire a good RE attorney to review the contract, offers, etc..to make certain it is as one believes it to be...as opposed to relying upon the RE agent for correct information.....ESPECIALLY if the agent can't be held accountable for their screw-ups, intentional or otherwise.