From My Experience: The Not-So-Earnest Money
Dealing with a "double agent" led this seller to financial intrigue. Here's why you should think twice before letting a real estate agent represent both you and the buyer.
Due to the frightening house market in California, we agreed to allow our real estate agent to "double agent" --- that is, to represent the buyer as well as us, the seller. After having our house on the market for a year and making vertigo-inspiring drops in our asking price, the real estate agent brought us a serious offer and in the nick of time. We needed to move to a new city in one month. She was our hero --- for a while.
We moved and were confident that even though we had no jobs lined up in the new city we would have enough cash from the house sale to relax and look around for a while.
Then our agent called. Our buyer had run into trouble; her loan was denied. So, while they worked through that issue, our sale was put on hold.
Making matters worse, our buyer was refusing to sign off on releasing the earnest money (the down payment she'd made on the house). This did not sound very earnest. Our double agent explained that the money wasn't guaranteed until all contingencies (in this case, the sale of our buyer's home) were lifted. So much for the deposit guaranteeing anything.
We eventually made the sale and got our money. But I've learned you can include in your counteroffer a clause requiring the release of earnest money whether your buyer's home sells or not. You can add an option allowing you, the seller, to rent your home to the buyer while the buyer works on selling his home. That way you get money while you wait on the deal to go through. Who knew!
The lesson of this tale is threefold: One, don't split your agent's loyalty; two, don't move before your deal is finalized; and three, know the contingencies of the deal better than you know your cat.