received an offer with a $50,100 deposit of which the contract said $100 was immediately non-refundable. Why?

In Selling Property - Asked by Ralph H. - May 19, 2015
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Answer(s)

R J.
Corporate Investor
San Jose, CA

I don't know if this is specific to California or not but I had this come up in a transaction too. It seems there was some court ruling (I do NOT know the details and I am not an attorney) where someone someone got into trouble because the court ruled there was no "consideration". So my attorney recommended I make some part of the deposit (in fact it was $100 too) nonrefundable.

May 19, 2015
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Henry P.
Broker/Agent
Walnut Creek, CA

Was the nonrefundable deposit comment made in an Addendum?

May 19, 2015
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Ralph H.
Broker/Agent
Healdsburg, CA

Thanks for the responses.
Yes, the comment saying that $100 was non-refundable immediately was in an addendum.
I have read court decisions that said the promise to buy or sell was consideration enough to make a deal a deal. Different courts, different opinions!

May 22, 2015
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Juve P.
Broker/Agent
Orange, CA

Consideration.

May 28, 2015
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Dottie S.
Broker/Agent
San Diego, CA

Your attorney made the right recommendation. It is called Independent Consideration, just google that term. You will find something along these lines--California Supreme Court 2010 case, Steiner vs. Thexton, the Court held that a buyer who provides separate and independent consideration under his purchase agreement (in addition to a deposit in escrow which is fully refundable to the buyer prior to expiration of the due diligence period) constitutes a bilateral contract which cannot be terminated by the seller.

Jun 2, 2015
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Ralph H.
Broker/Agent
Healdsburg, CA

As I read the California Supreme Court 2010 case, Steiner vs. Thexton, the Court held that the buyer's efforts and expenditures to develop the property were satisfactory to provide "separate and independent consideration" confirming the Seller could not unilaterally cancel the contract. Being a little long in the tooth, I don't always follow these court cases correctly but this one seems to confirm no specific amount of a deposit needs to be non-refundable to make a binding-on-the-Seller contract. I think my Buyer was just using a belt and suspenders approach to make sure I was tied in to selling to him.

Jun 20, 2015
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