I'm an agent in PA and have family member buying through another agent in NJ (I'm not licensed there). Couple of Q's for the forum but first a brief synopsis:
My bro-in law loves a house in a town where there is not much inventory. However, the owner is a control freak and has been very temperamental t/o this process. Asking price is 439k. My bro offered asking price and offer was verbally accepted but they are now working out some details. The owner won't close until Jan 31st 2013. 8 months away. At first it was supposed to be Oct 31st but now he pushed it back. He says he's either going to find a new house or build one. The earnest money my bro offered was instructed to give by his agent is 50k. My questions:
1) What do you think of the 50k earnest money (my bro's agent believes that this amount is what's keeping the owner in the deal) I think it's way too high regardless of the whims of this seller
2) How would you structure the contract to best protect the EMD?
3) What is my bro's recourse should the owner try to push back the date after the contract is executed.
Any other imput you can interject would be appreciated. Thanks. Drew
Is this an all cash deal? $50K EM is about right if he's paying cash, unusually large if its financed.
I'd never agree to a deal that wouldn't close for eight months. Way too much time for stuff to happen. The owner shouldn't have had it on the market if he wouldn't close until January or even October.
Houses are nothing but piles of bricks and sticks. There are always more. Your brother sounds a lot like Dan Aykroyd? sliding down the fire pole. This seller has him at a disadvantage.
Your brother would have to approve any delay in closing. He should get his EM back if he rejects the change. But seller's usually have to sign off on releasing the EM.
I'd suggest he keep looking and tell this seller he's willing to buy if he hasn't found something else before he gets ready to sell.
Thanks for the response Jon. It is a financed deal. And I agree, it does sound large deposit to me - in my area, they are usually about 5%. And I told him the same thing about the seller - he shouldn't even be on the market yet. My bro is convinced someone else will agree to this seller's terms and get this house if he doesn't stay in the deal - the inventory is pretty low there and houses like this don't come up all that often.
I'd say to make sure the money is placed in escrow, and put in an interest bearing account, with the credit for interest going to your brother in law. Put a clause in the contract that if the seller cannot close on the specified date, all of the deposit is to be returned to the buyer and released from escrow, at no cost to buyer. Make sure it's NOT a non refundable deposit, that the deposit is not released from escrow, and is credited towards purchase price. Also, make sure there are no contingencies regarding the seller finding another property.
Were it not for the fact that you said there's no other properties for sale, I'd say, walk away and find something else!
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