If a buyer cancels during the Inspection, when can a seller NOT give back the deposit?
We have all seen it before, we have a great looking deal, cash, no contingencies, and the buyer cancels during the inspections for no apparent reason.
There are two points I would like to make in this #TitleTalk:
- Can the buyer cancel for any reason?
- Can Sellers Keep Buyers Deposit?
Point #1 – Can the buyer cancel for any reason?
Almost all realtors I talk to know the rule; buyers can cancel for any reason during the inspection period. Yes, that includes just plain buyer’s remorse, on the last day… or in the last hour. I have however talked with many agents over the last 30 years, that don’t know that’s the rule.
Point #2 – Can Sellers Keep Buyers Deposit?
Here is an example where the seller did not have to immediately return the deposit.
The sale price of the home was $3,500,000, deposit $750,000, the seller wanted lots of security the buyer would close, cash/no buyer mortgage, 15-day inspection period, 30-day close, and the buyer canceled in the last hour of inspections.
Turns out the buyers found a better, less expensive property, and thought they’d would quickly get their depot back and slide it in to escrow on the new deal. But, the sellers were in Europe for a month, and the property had a septic system.
QUESTION: Does a seller have to give the deposits back automatically, if the buyer cancels during inspections?
ANSWER: No!…. How can this be? Almost no realtors know this, (you’ll have an unfair advantage if you remember this rule.)
The answer is on line 267 of the 10/21 Florida FAR/BAR “AS-IS” Contract.
“Buyer shall be responsible for prompt payment for such inspections, for repair of damage to, and restoration of, the Property resulting from such inspections, and shall provide Seller with paid receipts for all work done on the Property (the preceding provision shall survive termination of this Contract).“2021 FR/BAR AS-IS Residential Contract for Sale and Purchase
In our example, during the buyer’s inspections, the septic tank inspector had a big truck, and the weight of the truck damaged the driveway. The driveway was a big and long monolithic concrete pour that would require an entire tearout and rebuild to make right, so the expense was major.
Since the seller was out of town, he/she could not get estimates for the repair of the driveway damaged by buyers inspection. As a result they held the deposit until they could obtain estimates to repair the driveway.
The buyer was mad that (a) they could not get their deposit money returned immediately to use as deposit on the new home, (b) because they owed a large sum of money on a repair for their vendor.
Rule Summary: If a buyer cancels the contract during the inspection period, the seller is under a duty to sign the release and give back the deposit promptly and in a reasonable period of time; unless the seller claims the buyer damaged the property.
Experienced Real Estate Attorneys
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