Wednesday, July 7, 2010

Kuish v. Smith - goodbye non-refundable deposits...

This was a recent case in California in which the buyer submitted an offer with a $620,000 non-refundable deposit. The buyer cancelled the agreement and the seller eventually sold the property for more than the original offer. The seller refused to return the deposit because the contract had said it was "non-refundable".

Ultimately, the buyer did get his deposit back after the appeals court ruled. The case reflects the idea that actual damages have to occur in order to keep such a deposit. The key was that the liquidated damages provision in the contract wasn't initialed.

Advise your clients are to the meaning and intent of the liquidated damages and arbitration clauses in your contracts. Why? Because they could stand to gain or lose substantial sums by the simple lack of an initial.

I'm not a lawyer and don't offer legal advise but I do explain the contract and disclosures. Keeping my clients informed saves them money. My advice to agents - do the same.

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