The Daily Item, Sunbury, PA


February 10, 2014

Real estate Q&A: Buyer bullies seller into returning deposit

QUESTION: We had a contract to sell our house, and the buyer made a $1,000 deposit. Two days before closing, he called and said he had a change of heart and was backing out of the deal. Luckily, we had a backup contract in place, but when we told the first buyer that we were going to keep the deposit, he threatened to delay our new closing and cost us big bucks in attorney fees. We agreed to refund the money to avoid the problem. What good is the deposit anyway?


ANSWER: The earnest money deposit has two purposes. It provides the seller with proof that the buyer is committed to the deal and provides incentive for the buyer to close. In most contracts, a “liquidated damages“ clause provides relief to the seller for time and expenses if the buyer improperly breaks the contract.

A deposit as low as $1,000 generally is not worth fighting over, and I suspect the would-be buyer took advantage of that. If a buyer wrongly backs out of the contract, he can’t hold up a future closing just because of a fight over the deposit. And the winner in this sort of lawsuit generally gets reimbursed for attorney’s fees.

That might have given you the confidence to stand up to him. In the future, push for a larger deposit - generally 3 percent to 5 percent of the sale price. Requiring a larger deposit should not scare away a serious buyer because most contracts contain contingencies that allow the buyer to safely get out of the deal if the property fails inspection or the loan isn’t approved.

Gary M. Singer is a Florida attorney and board-certified as an expert in real estate law by the Florida Bar. He is the chairperson of the Real Estate Section of the Broward County Bar Association and is an adjunct professor for the Nova Southeastern University Paralegal Studies program. Send him questions online at or follow him on Twitter GarySingerLaw.

The information and materials in this column are provided for general informational purposes only and are not intended to be legal advice. No attorney-client relationship is formed. Nothing in this column is intended to substitute for the advice of an attorney, especially an attorney licensed in your jurisdiction.


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