Hi, I have some important information for you if you are a Seller in the Spokane market. This information, unfortunately, feels like a big secret, and it shouldn’t. It is called the Sellers Right to Perform. So to help you understand what this is and why you as a Seller should know about it, stay to the end because every bit of information is vital to you.
If you don’t know me, I am Desiree Renshaw, a Top Producing Realtor in Spokane, WA and I am ready to get started.
It is well-known that a purchase and sale contract is heavily weighted to protect the Buyer. So how is a Seller protected? In this video, I focus on one crucial point that often gets skipped in Spokane. I know this because in all the years I have been in real estate, a Seller rarely executes their right to perform when I am representing the Buyer. Is this because the Seller is choosing not to or because they are unaware this exists?
So, before we jump into the nitty-gritty of The Sellers Right to Perform, it is essential to explain what happens if a buyer defaults on the contract. I am going to try to keep this simple. When buyers submit an offer, they select one of two options in the event of a default. The Sellers election or remedies or Seller retains the buyers earnest money deposit. 90% of the time, the loss of earnest money is the option selected. So let’s move forward using the loss of Earnest money to explain the Seller’s right to perform.
When a Buyer submits an offer that includes a financing contingency, they are showing that to buy this home, they need to obtain a loan, and if they cannot do so, they cannot move forward with the purchase. As long as they abide by all of the terms and timelines within the financing addendum, their earnest money is protected should they need to get out of the contract because of an inability to get a loan. At what point during the buying process should the Buyer know that their financing is secure and they can buy the house? When should they lose their protection of the financing contingency, and if they cannot close, release their earnest money to the Seller? Remember that ever since mutual acceptance, the Seller is no longer marketing their home in an attempt to find another buyer. They are packing up their whole life, looking for a new place to live, and possibly moving out! They trust that their current Buyer and lender are doing their due diligence to purchase their home and close. Can we agree that the Buyer’s protection should at least be gone before all parties reach the closing table? Do you know that deals fall through at the closing table because of financing? What if the Buyer still has their financing protection in place when this happens? That means they keep their earnest money. So you, as the Seller, are out months of marketing, possibly the ideal marketing time for your area, moving costs, stress, and no earnest money. How does that sound to you? Not great, right?
So, when buyers submit their offer with a financing contingency, they can choose two options that are important to a seller. Automatic waiver of financing or Sellers right to perform. With the automatic waiver option, the Buyer and their lender select a timeline by which they feel financing can be secured. Upon that date, without the Seller having to ask, the finacing is waived, and the financing contingency no longer protects the earnest money. With the Seller’s right to Perform option, the listing agent and Seller may send the “notice to perform” to the Buyer requesting that the Buyer waive their financing contingency. With this option, if the Seller never sends the notice, the financing contingency stays intact through closing. By sending the notice, the financing is not automatically waived. The Buyer has the right to decline to waive their finacning, but the Seller then has the right to terminate the contract, or they can choose not to terminate. They can choose to move forward knowing that the financing protection remains, but at least they have the choice and can discuss which scenario is best with their Realtor instead of being unaware of this option.
Now there are timelines and intricacies associated with this, and I encourage you to discuss them with your Realtor. When reviewing a buyer’s offer, discuss the financing in-depth and understand how you as the Seller are protected. In addition, know that there is always the possibility of an Earnest Money Dispute, and it is essential to talk to your lawyer if you have questions or concerns regarding this matter.
Alright. Now that you are aware of the Seller's Right to perform. Do you have any questions or comments for me?
Check out my next video if you want to learn more about negotiating terms to help you as a seller, and if you are considering a shift in your Real Estate world, I would love to help. You can find my contact information below or always reach out through desireerenshaw.com.