Nonrefundable deposit. What if...

as a wholesaler i required $1,000 EM if you’re going to lock up a property. one interesting question that a potential buyer asked was “what if the day before closing someone breaks in and rips out the copper pipe etc. and it’s not in the same condition when we went under contract?”

I thought this was a good point and although (in the area the property is located) this is a slim chance, there still is the possibility of this happening. in such an event, would the nonrefundable deposit be refundable?

interested in your thoughts.

Highly unlikely. But if that is the case, then he will be entitled to a refund. You can add in the contract that you have with your investor buyer: “Deposit non-refundable unless the condition of the property from the date of the signed contract has been changed”. And you can also renegotiate with the seller for a lower price based on the defect to offset any potential losses.

Just my opinion. Hope it helps.

Do not know what your contract says but most say what condition the property will be in at the time of delivery.

Same would apply here as if there was a fire in the property…yes,…he gets his $$$ back.

Just remember when they do a inspection and find anything wrong you must refund their EM.

it reminds me of an article that says “a non-refundable deposit isn’t never is”

I guess it would be fair to say you ask for $1000 EM to lock up a property. Did you pay $1000 to lock up the same property?

I won’t accept a refundable deposit on a flip. It’s either go, or no go; not go, and maybe not go. If the buyer can’t be sure he’s got a deal by the time he looks at the place, he’s not a qualified buyer.

I ask for a non-refundable $2500 fee giving the buyer the right to close, but not the obligation.

I list every possible defect and problem I can find or imagine finding and list it for the buyer to examine. If there is vandalism, prior to closing, we can adjust the price, or the buyer can walk, but in no case do I give the $2,500 back.

Some buyers who don’t know me very well balk at that requirement. I say, I understand. Maybe the next deal will be more acceptable to you. Have a nice day.


what do you present it as? are you calling it a non-refundable deposit or are you saying this is my fee to lock up the deal (period)?

We always tell any buyer that is buyer subject2 make sure they contact the original seller to make sure everything is up to par because there are a lot of shady people out there selling subject2.

I wish I could say that I’ve had one name for it. Currently it’s my contract fee. But I’ve called it several things including a non-refundable earnest deposit, which defeats the purpose…

The name is not as important I suppose as the understanding that I’m not interested in tying up my property for a looky-loo, or someone with iffy financing options. I give the buyer all the time he wants, or needs, to check the place out and confirm what I’ve told him about the house BEFORE he gives me the check.

I list everything I know or can imagine are problems; termites, dry rot, foundation problems, plumbing leaks, main line clogged/broken/cracked, cracked windows, and mold, etc. etc.

I’ve included things I knew were not problems just to make sure I didn’t give the buyer an excuse to renegotiate my price, or ask for his money back.

This goes against the grain of the average seller trying to skin their buyers.

Once, I didn’t mention the main line was cracked. The buyer showed me a spot on the lawn that was all wet and spongy. Sure enough the main was cracked. He hadn’t given me a check at that point.

If he had given me a check and later found the drain problem he might have demanded his contract fee back, or renegotiated the price. However, since I insisted he do his due diligence before he committed, I was able to maintain my price, collect my check, and see if he was going to close, or not. In that case the guy closed two weeks to the day of giving me my non-refundable contract fee of $2,500 dollars.

One caveat here… I don’t necessarily ask for a non-refundable contract fee from a reliable, proven buyer.

You do what?