Which agent is at fault?

Question

Today we were supposed to close on a property we are selling. I learned that the buyer does not have the funds to close as they were waiting for their property to be sold. They never mentioned this fact and in the offer we accepted it included a target closing date.

1. Should I seek to keep the deposit and relist?

2. Is there any liability on the buyer agent in putting forward an offer they should have known would be problematic?

3. What due diligence was missed by the seller agent?

Caleb Brown · Answer

That's wild they did not disclose that. In our offer docs there is a checkmark box for that and an additional doc for contingency to buy/sell. I would think you can fight to keep EMD if that was never disclosed.

Megan Mcclung · Answer

1. attorney and realtor here. seller should keep the deposit here bc buyer breached contract (assuming there was no home sale contingency in the contract, which it sounds like there wasn't).

2. it'll be hard to go after buyer agent for damages bc seller would have to prove that buyer agent knowingly withheld info. honestly, just keep buyer's deposit and re-list (the deposit is essentially "liquidated damages" which are damages everyone agrees to upfront to avoid costly fighting when sh*t goes down).

3. definitely seller agent should have closely reviewed buyer's preapproval/POF. when i represent sellers, i even call the buyer's lender to discuss their offer (i do this before my seller accepts the offer). that typically ferrets out any problems my seller should be aware of as far as buyer's financing is concerned. honestly, i think if the listing agent had vetted the preapproval and/or called buyer's lender, you'd have avoided this situation completely.

4. to protect yourself going forward, make sure you always review buyer's preapproval/POF. preapprovals give so much info to sellers, like what type of loan buyer is using (for instance, FHA should make your spidey senses tingle bc you're being put on notice that buyer does not have a bunch of cash available for the deal, so you'll likely get squeezed for some $$$ during the inspection period). preapprovals will also note whether there are contingencies that need to be taken care of before buyer can close (like a home sale contingency). i'm big on picking up the phone and calling buyer's lender before having my sellers accept an offer. that might be something to ask of your agent moving forward as well.

Ernie Rodriguez · Answer

• If the buyer never disclosed that their purchase was dependent on another sale, and there was no home-sale contingency in the contract, you should be entitled to keep the deposit. That’s exactly what the deposit is for, to protect you if the buyer can’t perform.
• As far as the buyer’s agent, it depends. If they knew their client didn’t actually have the funds and still submitted the offer without disclosing that, that’s an issue. It might not rise to legal liability, but it could definitely be an ethical problem under their association or brokerage policies.
• On the listing side, the agent should have verified the buyer’s ability to close, whether that’s asking for proof of funds, a strong pre-approval, or confirming that the purchase wasn’t tied to another sale. This is a crucial role as a seller's agent.

Theresa Harris · Answer

Keep the deposit.  The buyer should have read the conditions and would have had to sign off on them to remove them (eg financing and inspection)...at least that is how it works where I am.

The fact that the buyer's agent never said there was a problem is not good.  Your agent should have also followed up a day or two before closing to make sure paperwork was sent where it needed to go.

James McGovern · Answer

@Moe Sidd what would a proof of funds look like if you need to sell an existing property to make the deal happen?

Marcus Auerbach · Answer

Not a great look for either agent, you can blame them, but that is inconsequential. I assume you got a pre-approval letter with the offer. Did the lender approve the buyer without a home sale contingency or did everyone overlook that?

Before you CAMR the deal, is the buyers listing under contract and if so when wil they close? In that case your shorter path to success is to stick with them.

Moe Sidd · Answer

@James McGovern,

Yes, you can typically keep the earnest money deposit if they failed to perform per the contract terms, so definitely fight to keep the money.

The buyer’s agent should have clarified the funding situation; if they knew and didn’t disclose it, that’s poor practice, though proving liability can be tricky.

On your agent’s side, they probably should’ve confirmed proof of funds or a lender pre-approval before accepting the offer. That’s a simple but critical step to avoid exactly this issue.

If it were me, I’d move quickly to relist so you don’t lose momentum and have your agent tighten up vetting for the next offer (require proof of funds or pre-approval in writing).

Moe Sidd · Answer

@James McGovern,

I guess it's best to avoid offers that require an existing property to be sold first altogether, unless you have no other choice. The market is tough now, so any potential buyer might struggle to sell their own property first. Sell only to folks who have traditional proof of funds available (bank account statements!). Tell them to make an offer once they have funds in hand. So if they really want it they can sell fast and make an offer soon.

Which agent is at fault?

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