What happens if the DDF check is lost after it’s delivered to the listing agent?

QUESTION: An agent in my office represents a buyer who just went under contract using the Offer to Purchase and Contract (Form 2-T). In accordance with the contract, my agent hand-delivered a certified check for the $5,000.00 Due Diligence Fee to the listing agent shortly after receiving notice that the seller had signed the buyer’s offer. A week later, the listing agent called my agent to say that although he had mailed the check that same day to the seller by first class mail, the seller had not received the check. The listing agent demanded that the buyer deliver a replacement check right away or else the seller would terminate the contract. The buyer’s bank says that since it was a certified check, she’ll have to pay the bank a fee and then wait 30-90 days before the funds can be released back to her. She doesn’t think it is right for her to have to take another $5,000.00 out of her account for a second check and then have to wait for up to three months before the first $5,000.00 is restored to her account! What do you think?

ANSWER: We agree with your client that it’s not right. Paragraph 20 of Form 2-T provides that “any fee, deposit or other payment to be delivered to a party herein may be given to the party or to such party’s agent.” Since your agent delivered the DDF to the listing agent, we think the buyer can take the position that she has complied with the terms of the contract and that the seller does not have any right to terminate the contract based on non-delivery of the DDF. The buyer should not be penalized for the fact that the check was lost after it was delivered to the listing firm in accordance with the contract.

Having said the foregoing, we don’t think the buyer is relieved from responsibility for ultimately paying the amount of the DDF. The way we see it, she should report the check as lost to her bank and pay the $5,000.00 at such time as the money is restored to her account. In the meantime, the listing firm and seller need to figure out between themselves how to handle the situation. Consideration should be given by the listing firm to paying the seller the $5,000.00 (or agreeing to reduce the amount of the commission payable at closing) on condition that the buyer reimburse the listing firm for that amount when the funds are restored, less any bank fees incurred by the buyer. A certified check is a more secure form of payment than a personal check, but as your situation illustrates, it can be a real hassle if it is lost. It would have been prudent for the listing agent to have used a reputable courier service that would have enabled the check to be tracked, and that would have enhanced the likely speed and reliability of its delivery. In our opinion, any broker who does not take such precautions when mailing a certified check opens himself or herself up to a claim of negligence.