As it was explained to me. This money is paid to us by the buyer as a deposit to keep us from selling it out from under him to another bidder with a higher price. It’s also paid to us to cover our time and annoyance if the buyer flakes out on us and doesn’t complete the sale. The bank has nothing to do with this. It isn’t part of the buyer’s down payment and has nothing to do with securing mortgage financing through the bank.
This is usually called “earnest money,” and although I didn’t mention it earlier, Kiwi Fruit is right in the sense that it’s usually considerably higher. It should be enough that it hurts the buyer if they walk away because of non-contingencies. The marketing and closing process is slow and costly. If the buyer ends up walking away, your loss is much greater than the $500 you get to keep.
… if you even get to keep it. Surprising how hard it is to actually keep it when a buyer backs out. And how readily real estate brokers give up your money. Especially if buying and selling agent are in the same company.
So when you wanted to protect yourselves, they threatened to abandon their purchase and look for a bigger sucker? That’s what you call a win-win.
$500 is less than the damage deposit and first month’s rent on a typical apartment. There is likely no place that your buyers could move into that would cost them less upfront. $500 is not some huge financial sacrifice; it’s basically the least amount of money they could spend to avoid renting somewhere. Maybe it’s all on the level but it sounds like a bold move by someone who needs housing and has only $500 with which to get it legally or otherwise.
So you agreed to accept repairs in lieu of rent? On an oral rental agreement? Do they have a date by when they are supposed to complete these repairs? My hunch is that there is no chance they will complete these repairs before closing. That wouldn’t matter to you if they actually close but I remain suspicious. I think there is a good chance that you will find they can’t close, you will have to evict them, and the house will have new damage you need to repair. I really hope it works out but none of the details you have shared lead me to think that it will.
I agreed to nothing. As I stated, my sister did make the agreement without my knowledge or consent.
Yeah, our earnest money deposit was like 1% of the purchase price I think. Which was about 2 months worth of market rent for that house. Since closing often takes over a month, that seems like about the right amount of time. The buyer is asking the seller to pause in their attempts to sell the house for a month+. If they back out for a not-sufficiently-reasonable reason, then they cost the seller a significant chunk.
Maybe this is a good time to ask your sister to buy out your interest, since she is able and willing to manage the property on her own? Just a thought.
If she had the money for this, I’d have done this eight months ago. I probably would have accepted 50 cents on the dollar just to get out from this quagmire.
When we sold our house in Louisiana, the buyer backed out. Her money was in escrow - and it probably still is, 38 years later. (This was a lawyer’s account.) It was explained to us that to get the money we’d have to sue, which meant that the house had to stay off the market. Plus we were leaving the state. So not too useful.
Just got phone call from the realtor. We have meeting Monday morning to sign documents and close the sale. There is still much time and many ways for this to go pear shaped but it’s encouraging.
Yay!
Crossing fingers that all is going well with the sale today.
I just spotted this thread and was baffled at the “don’t rent” attitude, as around here, renting back for a few days on either side is not uncommon. We did that when we moved into this house: rented back the townhouse from the new owner for a couple days, and the sellers of this house rented back from us for a few days.
Admittedly in our case it was a convenience rather than “couldn’t get paperwork done in time”. It sounds like there were a lot more red flags in the OP’s situation.
good luck with closing today
We met with the buyers, their banker and our realtor’s rep, signed a baffling number of papers and received a big, cashiers check from the bank. This suggests things are going well.
Many thanks to all for the thoughtful comments and support.
Congratulations Alpha Twit! I see my cynicism and suspicion were completely unwarranted in this case. I’ll just save it for the next time humanity disappoints me.
Many thanks. Too be fair, I don’t really perceive cynicism and suspicion in this thread. Simply a reasonable awareness of practical reality.
That’s what cynicism is. 
And congrats on the sale.
Thanks! Now comes the difficult part. Splitting up the money between myself and my three sisters. That may be a whole new thread.
I hope that goes smoothly!! Ideally it would be a matter of
- each person gets reimbursed for expenses incurred as part of settling the estate
- divvy the rest by 4
Depending on how the will was written, household goods might mess that up - it was a huge bone of contention when my mother passed away as she’d left some specific items to each sibling, and the brother we all hate threw a tantrum because he thought my oldest brother and I got off better (Mom left jewelry to us, as we were the only ones with kids to pass it onto).
Yeah, I wish it was that simple. All household goods and personal property have been amiably distributed and with the sale of the house, we’re down to the funds. At issue is the fact that three of us borrowed money from Dad over the years and never paid it back. Dad’s will recorded this debt and specifies that it will be factored into any final disbursement of the estate assets. By this formula, at least one of us will not see a dime.
Just how big of a fight do I want?