The Buyer’s first opportunity to leave a lasting impression with the Seller is making the initial deposit timely. Under both the FAR/BAR “AS IS” Residential Contract for Sale and Purchase and Residential Purchase and Sale Contract, the initial deposit is due within three (3) days of the effective date if not otherwise modified. Some transactions may include an additional deposit due within ten (10) days of the effective date if not otherwise modified in the contract.
A Buyer’s agents should converse with the Buyer before signing the offer about how long they need to make the deposit. When representing a Buyer, the agent should request that the Escrow Agent send their wiring instructions to the Buyer as soon as they send in the contract. If the Buyer would like to use a check to make the deposit, the check should be hand delivered or mailed overnight to the Escrow Agent to ensure it is received on time.
As a listing agent, the agent should review the receipt for the deposit from the Escrow Agent. A receipt for deposit is sent out by the Escrow Agent when the deposit is received. If the deposit was received after the deadline, the Seller could have options for how they want to address the missed deposit.
What happens if you have a bad start?
If a Buyer anticipates that they will miss the initial deposit deadline, the Buyer and their agent should request an extension to the initial deposit deadline to avoid the Buyer defaulting under the contract. When the initial deposit or an additional deposit is missed, the Seller has the right to obtain that deposit because missing a deadline in the contract could constitute a default under the contract. The Seller still has a right to the deposit even when the escrow agent never actually receives the deposit.
If the Escrow Agent receives the deposit after the deadline and the parties continue without acknowledgment of the missed deadline or if the seller doesn’t know the Buyer missed the deposit deadline, there could be other consequences down the road. For example, Debby missed her initial deposit but sent the initial deposit in the next day. The Seller, Sally, was unaware that the deposit deadline was missed. Debby was in the process of obtaining financing when she learned that she would not be attaining Loan Approval. Debby was within her financing contingency of 30 days, so she wanted to cancel. Unfortunately, Debby’s deposit is at risk. Under Section 8(b)(iv) of the FAR/BAR contracts, a Buyer can cancel if the Buyer does not receive loan approval within their contingency period and receive their deposit back as long as the Buyer is not otherwise in default of the contract. Because Debby missed her initial deposit and Sally is unaware, Debby could be in default. If Sally doesn’t waive the default, Sally could have a right to the deposit even though Debby canceled within Debby’s loan approval period.
Paying attention to deposit deadlines at the beginning of a transaction is essential to ensure that all parties are protected. If you have any questions, please reach out to your trusted real estate attorney.
