My question is: US-specific
QUESTION: I am a Canadian selling vacant land in Whatcom county.
In accepting a Purchase and Sale agreement, is there a
standard percentage of the Purchase Price which would be
the Earnest Money?
Also, can you give information about
the Feasibility Contingency? I am understanding this to be
a very broad condition which includes financing.
Purchaser has asked for 60 days for the feasibility
contingency with the earnest money refundable. The
period may be extended by 60 days with the earnest
money doubled and non-refundable. Are these typical
conditions?
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Ozzie Jurock, David Ingram and Gary Gogal reply
This question was originally sent to Ozzie Jurock at www.jurock.com, the
best real estate site in North America for real estate information. Ozzie
and I have likely participated directly (i.e. signed the paperwork) in over
3,000 real estate sales. However, why speculate when there is an
experienced Whatcom County Realtor on the CEN-TAPEDE list who assists me
with US real estate questions on a regular basis.
Gary Gogal of RJR Realty at 15-2500 Elm Street, Bellingham, 98225, (360)
671-7677 is a Canadian / American Realtor with years of experience dealing
with Canadians who want to buy in the USA, particularly Whatcom County and
Americans who want to buy in the Lower Mainland of BC.
His answer to the question follows:
In answer to your first question with respect to a standard percentage of
the purchase price as Earnest Money.
There has never been a standard amount or predetermined percentage figure
placed on Earnest Money in a real estate transaction. Even relating to or
arising from the monetary amount of sale.
I have always been of the opinion that a seller of real property should
negotiate the highest amount possible (Earnest Money) in securing an
agreement.( If only to have the buyer show his honest or true intent in
acquiring your property and furthermore keeping him/her interested through
to completion.)
I have also been of the opinion that it is very important to keep the
requirements of the buyer in mind during this process.
i.e. His/her ability to finance a transaction may be much stronger than the
cash at hand position that they may currently be in. This may be a valid
reason for offering a lower amount of Earnest Money than expected. Keeping
an open mind and asking pertinent questions will help in determining your
final decision for acceptance.
Please keep in mind that these funds received (under normal conditions) are
generally returnable to the buyer in the event that the contingencies ( in
favor of the buyer ) pertaining to the agreement are not met.
With respect to your question regarding Feasibility and the inclusion of
Financing as a contingency.
In selling raw or vacant land in the U.S. the Feasibility Study or
contingency is usually very specific.
That is to say, it is primarily used to determine whether it meets certain
criteria or needs of the buyer in further wanting to develop this property
and with respect to utilities (water, power, sewer, wetland study, etc,
etc.. )
It generally does not include a Financing Contingency which is separate and
distinct to the above with time for removal being negotiated as well.
You have not provided enough info regarding the 60 day Feasibility Study and
an extended 60 days with non-refundable earnest money.
Is this property a standard vacant building lot or is it a larger vacant
commercial property requiring additional research and review?
Let me assume that it is a standard building lot.
I would suggest to you that 20 days would be more than adequate time for me,
you, or anyone else for that matter to conduct a study or make the necessary
inquiries of County Officials to determine if it suited the buyers needs.
Should the buyer need additional time for review now may be the time to ask
for additional earnest money and termed non-refundable.
A commercial property may very well need much more time for review.
Let common sense prevail and “Good Luck” with your transaction.
Gary Gogal
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