Can a seller terminate if Additional EMD is paid by personal check?
QUESTION: I’m the listing agent on a property that was put under contract using the Offer to Purchase and Contract. The contract provides for the payment of an Additional Earnest Money Deposit by 5 PM today. The buyer agent showed up around 4 PM with the buyer’s personal check for the Additional EMD. I called the seller and discussed with her the fact that a personal check is not an acceptable form of payment for an Additional EMD according to the Contract. There’s a back-up contract in place and the seller wants to terminate the first contract and make the back-up contract primary. It’s now past 5 PM. Can the seller terminate the contract on account of the buyer’s attempt to pay the Additional EMD with a personal check? If the answer is yes, when and how may the seller terminate? The termination mechanism provided for in paragraph 1(d) of the Contract only applies if the buyer fails to timely deliver the Due Diligence Fee or Initial EMD.
ANSWER: In our view, a buyer’s failure to pay an Additional EMD by an acceptable form of payment is a material breach of the contract that would give the seller the right to terminate. As to when and how the seller may exercise the right of termination, note carefully that unlike delivery of the Due Diligence Fee and Initial EMD, time is “of the essence” regarding delivery of the Additional EMD. The buyer’s failure to deliver the Additional EMD by the 5 PM deadline gives the seller a discretionary right to terminate the contract immediately. Form 352-T (or 353-T if the property is a vacant lot or land) may be used to notify the buyer of the seller’s decision to terminate. The buyer may try to argue that your accepting possession of the personal check amounts to a waiver of the seller’s right to insist on payment of the Additional EMD by one of the means permitted in the Contract, but under the circumstances described in your question, we do not believe such an argument is persuasive.
This article is intended solely for the benefit of NC REALTORS® members, who may reproduce and distribute it to other NC REALTORS® members and their clients, provided it is reproduced in its entirety without any change to its format or content, including disclaimer and copyright notice, and provided that any such reproduction is not intended for monetary gain. Any unauthorized reproduction, use or distribution is prohibited.