Jim Goldsmith, Esquire has been lecturing Lancaster Realtors about the importance of the buyer’s earnest money deposit for years. He observed that the average deposit in Lancaster County was insufficient to ensure the buyer would perform and insufficient to compensate the seller if the buyer wouldn’t perform. I think Jim would be pleased to see that in today’s market the average deposit amount has increased, but what if the buyer’s deposit is never received by the listing broker?
We have come to depend on the U.S. Mail to deliver our deposit checks to the listing broker in recent years, rather than hand delivering them. If the buyer mails their deposit check to either their buyer agent or to the listing agent, it is likely that it will not be received within the timeline established in the Agreement of Sale. Unfortunately the mail is currently not quick and not reliable. Hand delivering the deposit is a safer bet. If your buyer is from out-of-state and must mail the check, they should pay the premium to overnight it.
But let’s back up a step. Why does the default timeline allow five days for the buyer to deliver the deposit? A lot can happen in five days, and the Agreement is not on solid footing until the deposit is received by the listing broker. If we hand deliver deposits and we don’t drop them in the mail, why not deliver the deposit within one day of acceptance of the offer? Allowing one day to deliver the deposit to the listing broker is going to be a stronger position than five days when you are preparing that competing offer.
If you, as the listing agent, allow five days to receive the deposit and the buyer never delivers it, then you’ve lost days of marketing the home for sale and will be faced with putting the home back on the market. Shortening this time period is going to keep you on track to either confirm you’re in good shape or, if the deposit is not delivered, you can go to the next buyer right away without missing a beat.
Let’s back up again and review what forms the deposit can take. Most deposits are delivered as a personal check from the buyer. What can go wrong with a personal check? A buyer can deliver the check and then stop payment. It happens more often than you may realize. When this happens you are back to square one with the sale, and you’ve lost more than the five-day period waiting for the deposit to arrive. As an alternative, you can request a certified check from the buyer for the deposit; or you can provide wiring instructions for the buyer to wire directly to the listing broker. Wiring is a great option for the out-of-town buyers who have to scramble to send the deposit within the timeline of the agreement. If your buyers are getting a mortgage, make sure they get a certified check from their bank account. The lender is going to need to document where the funds are from.
Buyer agents, consider shortening the timeline in your offers for delivering the deposit. You’re going to be hand delivering it anyway, so do it faster. Listing agents, consider requesting the deposit in the form of a certified check or wire to make the contract ironclad and to protect your seller.
Lisa Naples, Berkshire Hathaway HomeServices HomeSale Realty
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