I have been pleasantly surprised at the number of comments I received relative to the disposition of Purchase and Sale deposits, and the problems that many of you have experienced because of the uncertainty in what to do about the “Offer Deposit” so-called, normally $500 or $1,000, which is delivered to bind the Offer. See my post on Purchase and Sale Deposits in www.realtorsresourceblog.com

In point of fact, the Seller changes his position once an Offer is accepted. In most cases, marketing efforts are sharply curtailed, and even if they continue, they are presented on a “back-up” basis which does not engender a lot of enthusiasm from prospective purchasers. So, there is a “price” involved in the Seller’s accepting an Offer, and that needs to be somehow recognized.

For the Buyer, the accepted Offer is an opportunity to “get serious” about the property. The Buyer pays for an inspection, and often has his attorney look over the Condominium Documents and Condominium Information, if this transaction involves the purchase of a Condominium Unit. Well drafted Offers (future blogs will consider the status of Offers in Massachusetts) will give the Buyer many “outs” if the transaction does not go forward.

What seems to be the problem is what you, as the realtor holding the Offer Deposit, must do with same if for some reason the deal does not go to signed Purchase and Sale Agreement status. The normal approach would be for the deposit to be returned,in full, to the Buyer if the Buyer decides not to proceed. Most realtors will require both the Seller and the Buyer to “sign off” on such return.

Most realtors I have dealt with will NOT return the deposit unless and until a piece of paper, authorizing the Release of the Offer Deposit, with signatures of both Seller and Buyer, is obtained. If it is not obtained, for whatever reason, the Offer Deposit goes into some form of purgatory in the realtor’s fiduciary account, never to see the light of day for either the Seller or the Buyer.

Suppose the deal doesn’t go because the Buyer just “walks away” and cannot be located. Suppose the deal doesn’t go because the Seller is not comfortable with the Buyer’s reasons for not going forward, and, in effect wants to punish the Buyer for acting irreponsibly or arbitrarily. Haven’t we seen this happen in our practices?

I have a suggested solution, which I would appreciate your feedback on. In my opinion, my approach champions some much needed reform in this area.

My suggestion is two-pronged:

            1. No Request from the Buyer.If the Buyer does no request  the Offer Deposit back, in or within thirty (30) days of the date of the Offer, the Offer Deposit, in full, shall be delivered to the Seller.

            2. Request from the Buyer for Return of Offer Deposit. If the Buyer requests the Offer Deposit back within said thirty (30) days, Eighty (80%) per cent of the Offer Deposit is returned, no questions asked. The remaining Twenty (20%) is delivered to the Seller to defray Seller’s costs for participating in the inspoection and delivering Condominium materials, if a Condominium Unit is the subjectof the sale.

This set of provisions would be an inetgral part of the Offer to Purchase, thus agreed upon in advance. The 80/20 split of the Offer Deposit is mechanical, but it ends disputes. Having the Buyer bear some responsibility for the work involved in getting to a signed Offer limits “tire kickers” who sign offers like eating popcorn. Serious Buyers may think twice before leaving $200 or $100 on the table. The transaction can “move on” without the weight of what to do with the Offer Deposit. Neither the Seller or Buyer can dispute the dispostion of the Offer Deposit. it is agreed upon beforehand, and is based on reason.

I would be interested if my readers think a system like this could work. It would end endless headaches for our profession, and the need to go to Small Claims Court or other litigation for a relatively small amount of money.

The Greater Boston Real Estate Offer Form and Purchase and Sale Form have not been amended for almost twenty years. Future posts will explore this situation and suggest some other needed revisions. I truly believe that the proposed “automatic” Offer Deposit solution makes sense and should be included in a new Offer Form. Get me your responses to this idea through blog comments or emails to etopkins@topbev.com. I promise to respond and keep this matter alive.