While presumably most buyers and their agents are operating in good faith in writing purchase offers representing that their buyer is ready, able, and willing to complete the purchase, there are many others who are writing purchase offers on many properties, tying them up, and then failing to timely make their earnest money deposits or perform other contract obligations. Today’s Article will focus on ways to keep your sale on track and to avoid your property being held hostage.

All contract forms referenced in this Article will be those provided by the California Association of Realtors (CAR) which is the industry standard for residential real estate. Offers are made and generally accepted using the CAR Residential Purchase Agreement (RPA).

A Contract is formed once the Seller has accepted the offer on the terms set forth in the RPA and any Addenda or Counter-Offers. Next comes performance of the obligations stated in the Contract. The RPA expressly states at Article 14.C.(2): “Seller, after first delivering to Buyer a Notice to Buyer to Perform (NBP) may cancel this Agreement for any of the following reasons: (i) if Buyer fails to deposit funds as required by 3A or 3B; (ii) if the funds deposited pursuant to 3A or 3B are not good when deposited….”. The NBP will give the Buyer at least 2 days to perform.

Significantly, under general contract law for a contract to be valid, it must be supported by valid “consideration”, which is generally considered to be the purchase deposit. Absent good consideration, there is no binding contract. However, case law through the courts have determined that the buyer’s “promise” to buy is sufficient consideration to form the Contract. Payment of a purchase deposit is just a contract obligation…. one which a buyer might want to avoid if they are shopping and tying up multiple properties before making a choice.

So here are some possible solutions that may prevent your listing from being tied up in such a situation:

1) Counter-Offer – if the Buyer’s deposit is not delivered with the RPA, counter with a requirement for the deposit to be tendered or there is no deal. However, many sellers and agents don’t want to counter an otherwise acceptable offer for fear that the buyer might not deposit their funds.

2) Serve NBP with Acceptance – the standard RPA language calls for deposit within 3 days following acceptance (3.A(1)). NPBs can be served in advance of a performance date, therefor the NPB can be served with the acceptance and require that the funds must be in escrow within the 3 days. If not, the Seller can then terminate.

3) No Escrow without Funds – Do not open escrow without having the funds actually deposited. This avoids the delays of doing a Cancellation.

There is no guaranty that non-performing Buyer’s will go away without a fight. But forcing them to do what they are contractually obligated to do will take away their leverage. More importantly, the listing agent owes a fiduciary duty to the Seller to protect the Seller’s interests and hopefully prevent the Seller’s property from being held hostage while a Buyer shops for deals.

The objective of this Article is to enable listing agents and Sellers to avoid a bad situation in the first place. Legal claims for recovery of damages are a different matter.

BPE Law has been assisting our clients with their real estate, business, and estate planning needs ever since we started doing business. We’re active in the communities in which we live and in protecting and assisting our clients legal interests. If you have legal questions, give us a call at (916) 966-2260 or e-mail me at Our flat fee consult for new clients may get you the answers you need for the questions you have.

The information presented in this Article is not to be taken as legal advice. Every person’s situation is different. If you are facing a legal issue of any kind, get competent legal advice in your State immediately so that you can determine your best options.