Earnest Money Check Bounced
Got a question from a friend, can't answer so I turn to you all. If an earnest money check bounces or stop payment is placed on it, are you still bound by the contract since you have not met ALL the conditions (deposit) of the contract?
I am not a lawyer but I would say no because no consideration has been given to put the contract in motion
Kecia
I agree with klgl22 consideration is an issue, not sure about loopholes though, as in intent, payment with a check even a bad one ect...ect does a check get treated any different than cash?
Sounds like you have 1 of 2 possible buyers here: 1) a deadbeat; 2) someone who isn't interested in purchasing the property. In either case, its probably worth moving on and finding another. I would send a certified letter to your buyer advising him/her/them that the check bounced and allowing them 5 days to make good on the check. If not, send a letter advising that you wish to rescind the contract (in light of the lack of consideration).
mrlee,
Is your friend giving the earnest money check, or getting it?
You didn't say.
My thoughts are that if the check bounces, and especially if there has been a stop payment put on it, I would move on to finding another buyer. My first step would be to call the person that gave me the check, and ask them what's up, and depending upon their attitude, remind them that writing bad checks is a crime.
Good luck,
Jeff
He did not say, but I assume from the way he asked the question, that he was the one that gave the check, began having second thoughts about the purchase and for some reason the check was returned.
A binding contract does not require earnest money. The consideration given by the buyer is the purchase price to be paid for the property. Earnest money is a show of good faith, but not essential to a valid real estate contract.
I would think, in this case, that if an earnest money deposit is specified as a provision of the contract, then failure to deliver the earnest money deposit is a breach of the contract. The seller can rightfully declare the buyer in breach and the contract null and void.
Just my opinion, I am not a lawyer.
The funny thing that just happen to us last night only the earnest money was about 10,000.00...if the earnest money is part of the sale(Deposit in escrow)you bet you have recourse as a seller to 1, wait to see if the buyers can make good on the bounced check, if no then legal course or arbitration, either case the buyers has broke the contract, 2 you can pushed to have them still buy the property, but that deposit is stilled owed to the seller, not sure again get some legal advice, but I have my realtors liscense in Nevada and that deposit is a "contract"...later Abe
Seller could sue for specific performance.
It was not said whether the seller even accepted the buyers offer. If not....what contract exist.?
Also writing bad checks affects all your real estate holdings, because it is hard to keep up with them in the slammer.
A contract should have a consequence for each condition. If it is not mentioned in the contingency clause it may be in the boilerplate (small print). Usually the offended party can declare a void or re-negotiation but there may be other issues involved like a timeframe to cure.
Jim
If youre in California and use a CAR form it spells out in the agreement that the seller may cancel the agreement if the check bounces