Any advice how to deal with nonrefundable deposit requirement?

Question

Hi,

In October I sent out a letter to an owner of the MHP asking if he would be interested to sell his park. In November I received a reply that yes he is interested to sell, so after few back and forth, I sent out signed formal purchase offer based on standard template.

The seller told that his lawyer needs 30-45 days to check an agreement I sent him.

On dec 29, the seller’s lawyer sent me an agreement with changes, which he claimed will make it more "fair".

Those are the changes:

• $5000 refundable deposit turned into $10,000 non-refundable deposit;
• Seller made us responsible for the cost of ALTA Survey of the RE;
• Seller wants we provide him all surveys, reports…, at no expense, in the event we decide to not close the purchase;
• We wanted either buyer or seller may record a sale agreement. Seller wants none may record a deal;

My attorney says that $10,000 non refundable payment to the Seller should be a deal killer.

Seller virtually never gets money until closing, to make sure they can perform and deliver clean title.

So when we told that to the seller, before proceeding with other details, seller's lawyer told my attorney that seller will not compromise on the requirement for a $10,000 non refundable deposit.

I like this deal and I would really like to close it, but I am not sure how to proceed.

Does anybody here have experience with something like that?

Why would the seller require non refundable payment, especially if the lawyer is saying it is a deal killer for that type of deals?

Any information or assumptions would be appreciated.

Thank you.

Mindy Jensen · Answer

Account Closed , I'd offer $10k deposit to a title company with stipulations that it goes non refundable AFTER certain steps are met. Like proof of clear title, inspection, appraisal. I just bought a MHP.

You shouldn't give it to the seller as non refundable unless you can afford to walk away  from $10,000.

Ralph C. · Answer

You can always renegotiate initial terms.

Just offer something like 5k refundable by or before due diligence expiration and then the next 5k deposit due at dd expiration which at that point both can be non refundable because by then you would know if you'd be going forward.

John Thedford · Answer

10K NON-REFUNDABLE? LOL LOL..sounds like a typical "wholesaler"

Charlie MacPherson · Answer

Account Closed  It sounds like the seller or his attorney thinks he can walk all over you.  The terms as stated, are borderline abusive.

Your attorney needs to talk with the seller's attorney and go to bat for you.  If he can't, you need someone else on your side.  Either a sharp real estate agent or another attorney.

First of all, nobody needs 30-45 days to review a contract.  That's silly.  It should take less than 2 hours.  I'd give him 72 hours to respond.

I agree with others here - non-refundable deposit ONLY after due diligence.  Why in the world would you pay for something you're not going to buy?

The survey should be on you if it's required by your lender.  If the seller wants it for closing documentation, he should pay for it.

If you don't close and the seller wants the reports and surveys, he should pay for 100% of the cost.

There's no legitimate reason for you not to be able to record the pending sale except to weaken your negotiating position.

At this point, my negotiating strategy would be to lay down the law - politely.  Tell the seller that the terms his attorney laid out are not terms you can work with.  If he really wants to sell, you need some flexibility on them - and if not, best of luck to you.

My thinking is that as you approached him, he (or his attorney) thinks he's holding all the cards.  Just like buying a car, you need to be prepared to walk away - and mean it.

Good luck!

Account Closed · Answer

Thank you guys for all your tips and advices.

@Mindy Jensen , seller wants his lawyer becomes a escrow agent in our deal

Richard Allen · Answer

It's often stated that you can't let emotions interfere with sound real estate decisions. Something might be wrong with this property that you have yet to discover in due dilligence, such as bad sewer lines.

I would listen to the advice of your lawyer. If the seller really wants to sell, the deposit must be refundable, otherwise the deal is dead.

Also keep in mind that even when a deposit is refundable some sellers refuse to give it back. Your alternative is legal action, which may cost you more time or money than the deposit is worth. This may be one of those sellers.

Tom Gimer · Answer

I would never allow a client to put up a non-refundable deposit... unless it became non-refundable only at the end of a feasibility period when buyer elects to proceed.

Any advice how to deal with nonrefundable deposit requirement?

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