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Going hard on your earnest money – are you sure you’re protecting your client?



I recently had a deal where the Buyer’s 30 day Financial Contingency was up and my Sellers wanted to ask the Buyers to waive their financial contingency.

My initial reaction was, “In this market?” You see, unlike almost every contingency form in our Northwest Multiple Listing Service Library that has a automatic timeline attached that waives said contingencies once the agreed upon timeline is met, the financial contingency in our MLS forms is not an “automatically deemed satisfied” contingency.

So the Buyers must actually give “notice” (that means in writing) they are in fact, agreeing to waive the condition to purchase the home based on their ability to obtain financing.

The Loophole

Of course, the buyer could simply give notice they are waiving their financial contingency (there’s an addendum for that)…but why? In essence, if the buyer does not give notice they are waiving their contingency, then even after the 30 days has come and gone, if the buyer cannot obtain financing and gives written confirmation of such from their lender, they still have the right to their earnest money.

On top of that, the seller must ask the Buyers to waive their contingency by giving them notice of termination! (You guessed it…there’s an addendum for that as well) So, in order to get the buyer to waive their financial contingency, the seller must threaten termination of the entire agreement to do so! This gives the buyer the right to walk away from the entire deal if they simply do not respond to the sellers request (they have 3 days from delivery of the notice). Oh, and by the way…the Earnest Money is refunded back the Buyer!

The Remedy

So if the buyer refuses to waive their contingency or the seller isn’t quite willing to give notice to terminate in fear the buyer “calls their bluff” isn’t willing to waive their contingency…what’s the seller to do? In most cases, nothing! The financial contingency form is a “leap of faith” form in our library and woefully inadequate to protect the sellers position in the Agreement. But then again, deals close everyday in Washington without the buyers waiving their financial contingency so why bother?

So, Do Your Forms Protect the Seller or the Buyer?

As you can see, the financial contingency form is heavily laden for the buyer in our State. On top of the waiver issue, the buyer is also protected in the event the appraisal comes in below value and can even terminate and be refunded their earnest money if they were unable to obtain a homeowners or property insurance binder. (Yep, there’s an addendum for that too!) So, what would you do for your sellers if you were in my shoes?

Patrick Flynn is a 13 year Veteran of this Real Estate fray and a blogger on mySeattleblogs and is active in various social networks. Like many writers at Agent Genius, Patrick wears a few hats other than a Broker's lid- he is also a Certified Real Estate Instructor for the State of Washington and has enjoyed delivering 1,000+ hours of clock hour and non-clock hour approved courses in his career. Patrick has also been a Designated Broker since 2003 and revels in being able to coach and mentor fellow real estate professionals.

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  1. Bruce Lemieux

    June 1, 2010 at 12:02 pm

    I deal with this on every one of my listings. Our contracts read the same here in metro D.C. for financial contingencies. They don’t just expire; the seller must give notice to the buyer to remove them, and the entire contract is void if they don’t after 3 days.

    Here’s what I do:

    #1. I send the releases over to the buyer’s agent 1 week before the expiration date telling them that we expect a release by the deadline. This usually gets the following reaction from the buyer’s agent: “Huh?”. From there, I do my best to encourage/pressure them to send the release. This works ~50% of the time. If not:

    #2. Get a letter from the buyer’s mortgage saying that everything is approved. At this point, it’s usually conditional only on getting a clear best inspection and proof of insurance. If a solid buyer has financing but won’t sign the release, then I don’t push for it.

    #3. If I can’t get the letter and it looks like the loan is dragging along, then I continue to work with/push the agent and the bank to understand *why* it’s not done. If there’s a high enough level of concern, then we may well take the slash-and-burn option of sending over the notice. We weigh up the risk and then the seller has to make the call.

    At the end of the day, if you have a buyer who wants to buy, and a seller who wants to sell, then the deal will close with or without these releases.

  2. Denise Hamlin

    June 1, 2010 at 8:59 pm

    I guess we’re more fortunate here in Iowa. The financing contingency needs to be released by the buyers on a date specified in the purchase agreement. (Usually 30 days).

    Bruce gave you a couple of ideas about how he deals with your convoluted way of doing things. Really glad I’m not in your shoes. Seems like a lot of extra work to me!

  3. Patrick

    June 2, 2010 at 11:03 am

    Thanks Bruce and Denise for your comments…fun stuff this financing!!

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Austin tops the list of best places to buy a home

When looking to buy a home, taking the long view is important before making such a huge investment – where are the best places to make that commitment?



Looking at the bigger picture

(REALUOSO.COM) – Let us first express that although we are completely biased about Texas (we’re headquartered here, I personally grew up here), the data is not – Texas is the best. That’s a scientific fact. There’s a running joke in Austin that if there is a list of “best places to [anything],” we’re on it, and the joke causes eye rolls instead of humility (we’re sore winners and sore losers in this town).

That said, dug into the data and determined that the top 12 places to buy a home are currently Texas and North Carolina (and Portland, I guess you’re okay too or whatever).

They examined the nerdiest of numbers from the compound annual growth rate in inflation-adjusted GDP to cost premium, affordability, taxes, job growth, and housing availability.

“Buying a house is a big decision and a big commitment,” the company notes. “Although U.S. home prices have risen in the long term, the last decade has shown that path is sometimes full of twists, turns, dizzying heights and steep, abrupt falls. Today, home prices are stabilizing and increasing in most areas of the U.S.”

Click here to continue reading the list of the 12 best places to buy a home…

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Housing News

Average age of houses on the rise, so is it now better or worse to buy new?

With aging housing in America, are first-time buyers better off buying new or existing homes? The average age of a home is rising, as is the price of new housing, so a shift could be upon us.



aging housing inventory

aging housing inventory

The average home age is higher than ever

(REALUOSO.COM) – In a survey from the Department of Housing and Urban Development American Housing Survey (AHS), the median age of homes in the United States was 35 years old. In Texas, homes are a bit younger with the median age between 19 – 29 years. The northeast has the oldest homes, with the median age between 50 – 61 years. In 1985, the median age of a home was only 23 years.

With more houses around 40 years old, the National Association of Realtors asserts that homeowners will have to undertake remodeling and renovation projects before selling unless the home is sold as-is, in which case the buyer will be responsible to update their new residence. Even homeowners who aren’t selling will need to consider remodeling for structural and aesthetic reasons.

Prices of new homes on the rise

Newer homes cost more than they used to. The price differential between new homes and older homes has increased from 10 percent traditionally to around 37 percent in 2014. This is due to rising construction costs, scarcity of lots, and a low inventory of new homes that doesn’t meet the demand.

Click here to continue reading this story…

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Housing News

Are Realtors the real loser in the fight between Zillow Group and Move, Inc.?

The last year has been one of dramatic and rapid change in the real estate tech sector, but Realtors are vulnerable, and we’re worried.



zillow move

zillow move

Why Realtors are vulnerable to these rapid changes

(REALUOSO.COM) – Corporate warfare demands headlines in every industry, but in the real estate tech sector, a storm has been brewing for years, which in the last year has come to a head. Zillow Group and Move, Inc. (which is owned by News Corp. and operates ListHub,, TopProducer, and other brands) have been competing for a decade now, and the race has appeared to be an aggressive yet polite boxing match. Last year, the gloves came off, and now, they’ve drawn swords and appear to want blood.

Note: We’ll let you decide which company plays which role in the image above.

So how then, does any of this make Realtors the victims of this sword fight? Let’s get everyone up to speed, and then we’ll discuss.

1. Zillow poaches top talent, Move/NAR sues

It all started last year when the gloves came off – Move’s Chief Strategy Officer (who was also’s President), Errol Samuelson jumped ship and joined Zillow on the same day he phoned in his resignation without notice. He left under questionable circumstances, which has led to a lengthy legal battle (wherein Move and NAR have sued Zillow and Samuelson over allegations of breach of contract, breach of fiduciary duty, and misappropriation of trade secrets), with the most recent motion being for contempt, which a judge granted to Move/NAR after the mysterious “Samuelson Memo” surfaced.

Salt was added to the wound when Move awarded Samuelson’s job to Move veteran, Curt Beardsley, who days after Samuelson left, also defected to Zillow. This too led to a lawsuit, with allegations including breach of contract, violation of corporations code, illegal dumping of stocks, and Move has sought restitution. These charges are extremely serious, but demanded slightly less attention than the ongoing lawsuit against Samuelson.

2. Two major media brands emerge

Last fall, the News Corp. acquisition of Move, Inc. was given the green light by the feds, and this month, Zillow finalized their acquisition of Trulia.

…Click here to continue reading this story…

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