Q: We are selling our house to a nice couple. We just found out that their deposit check bounced. They have a reasonable-sounding reason. Should we be concerned?
A: Yes, you should be concerned, but not necessarily worried. Have your buyers immediately replace the check with a certified check or wire. If they are unable or unwilling to do this, you should move on to the next prospective buyer.
The initial deposit, known as the “earnest money deposit,” is the buyers’ way of showing they are serious about purchasing your home. Under standard purchase contract forms, the seller can keep only the amount of the deposit if the buyer cannot close, so make sure to get a sufficient amount. I recommend a minimum of five percent, but more is better; 10 or even 20% of the purchase price is the goal.
A larger deposit keeps the buyer motivated to purchase your house. It is easier for a buyer to walk away from a small deposit if they get cold feet, so getting a more substantial deposit makes your deal more likely to close.
After you enter into a contract to buy or sell a home, you should write down all of the deadlines on your calendar. These dates are important and should be strictly enforced. If you are willing to extend a deadline, make sure to have a written addendum to the contract signed.
In my experience, most transactions that fail have multiple warnings signs, such as issues with the deposit, missed deadlines, or attempts to renegotiate the terms after the ink is dry. While one of these issues, standing alone, does not mean your deal is going down the tubes, you should be concerned if the problems start to pile up.
It is great when the people on the other side of a transaction are pleasant, but good people keep the promises they made in the purchase agreement. It is fine to look past one problem that is quickly corrected but keep a sharp eye out for additional issues. Remember that friendly people are not always good people, although it is best when you get to deal with folks that are both.