In Alabama, can a company accept more than 1 earnest money check on the same property??

Question

I am a real estate agent who is fairly new to the business. I wrote a contingency contract with break clause on a home what already had a contingency contract with break clause. In essence, my contract is a BACK UP contingency. Both contracts were contingent on purchasers selling their homes. My clients have decided to move closer to their parents in Oneonta and want to cancel their contingency contract. Do they lose their earnest money if they withdraw now? I had a real estate attorney who told me he didn't think a company could take more than 1 earnest money check on a house? Does anybody know... I can't find anything to that effect in the License Law book.
Thank you...

Answer 1

ASK your Broker

I don't think they should have ever been given the earnest money. That only happens when the offer is accepted.

Have they checked to see if the check has cleared their bank?

Just have them say he lost his job.

Answer 2

That's an interesting question. I can tell you how it's done in Texas - might be similar in Alabama.

House is under contract. Set to close on January 30. My buyer likes it too, so we put in a back up contract. There's an addendum that states that this contract is "in" if the other one falls out by a certain date. We actually negotiate the terms of the deal, and give the earnest money check. We also do an "option period" , for the purpose of inspecting the house, and for which the buyer pays a fee (maybe $10/day, for houses under $150k). The "option fee" check gets cashed by the seller.

If the first deal falls out, my buyer's contract is "in". Now the days start counting. My buyer "has the option" to back out for any reason, during the option period (maybe 5 - 15 days, depending on what types of inspecting need to be done).

Although TREC (Texas Real Estate Commission) allows for the second earnest money check to be deposited with the title company, most title companies are hesitant about taking a contract "on top" of another receipted contract, so what we do is this - Negotiate, and sign the back-up contract along with the back up addendum. Seller cashes the option fee check - this gives the buyer the option to back out. The earnest money check gets held by the listing broker (not cashed, although it probably could be as long as co-mingling of funds does not happen)

Prior to the "back up" addendum being promulgated by TREC, many agents would take "back up" offers and rather than negotiate them, just put them in their files, "in case" the deal heads south. Actually having it negotiated and signed is way better.

BTW - Don't falsify information about loan qualification to get out based on financing condition. That's called fraud, and besides losing your license, you could go to prison.

Answer 3

What you describe is very common place. The only thing the real estate agency does not do is accept TWO primary offers. There is but one primary, and the remainder are secondary. If the real estate agency has concerns as to whether or not you will close on this deal, they are fully entitled to continue to show and accept secondary offers behind your primary offer, including earnest monies.