Dave Watkowski

Friday, February 12, 2010

LEGAL PRECEDENT

NONREFUNDABLE DEPOSIT DEEMED INVALID

California Association of Realtors Feb. 12, 2010
An agreement for a "nonrefundable" escrow deposit is invalid and unenforceable, according to the recent California case of Kuish v. Smith (2010 WL 373225). This case serves as a good reminder for REALTORS® that inserting a "nonrefundable deposit" provision into a real property purchase contract may be legally ineffective.



The Kuish case involved a $620,000 escrow deposit for the purchase of a $14 million oceanfront home in Laguna Beach. Instead of using a liquidated damages provision, the buyer and sellers merely agreed in the purchase contract that the deposit would be "nonrefundable." According to the trial court, both parties were "big boys," meaning that they were "sophisticated business people [who] understood all the ramifications of their actions in freely negotiating to make the [deposit] non-refundable."



The buyer eventually cancelled the agreement. The sellers refused to return the deposit to the buyer, even though they sold the property to someone else for $1 million more.



The buyer sued to recover the $620,000 deposit, and won on appeal. The court stated that "any provision by which money or property would be forfeited without regard to actual damage suffered would be an unenforceable penalty. To construe the term 'nonrefundable' to establish [the sellers'] entitlement to the full deposit without regard to actual damages would essentially create a liquidated damages provision." Yet, the parties in this case did not separately sign or initial a liquidated damages provision.



Under C.A.R.'s Residential Purchase Agreement, the sellers would have been entitled to the escrow deposit (not to exceed three percent of the purchase price), if the parties initialed the liquidated damages provision, and the buyer had no contingencies or had removed all his contingencies.

July Market Report

Here are the real estate market sales numbers for July, 2009.

These numbers are from my own research using the Desert Area Multiple Listing Service. They account for activity in the desert cities of Palm Springs, Cathedral City, Rancho Mirage, Palm Desert, Indian Wells, La Quinta and Indio only.

Current Number of Active Listings (Homes for Sale): 4,713

New listings that came on the market during the month of July: 951

Number of homes that went either contingent or pending during July: 891

Number of homes sold in July,2009: 753 (628 sold in July, 2008)

Keeping you informed ...


Our local Keller Williams offices gathered together this morning at the Board of Relators in Palm Desert for our monthly sales meeting. Heath Hilgenberg reviewed market activity here in the desert. While Keller Williams was #1 in sales and volume again in June, the really important part of his message was the vibrancy of our local market.

If you missed my blog report of last week, the highlights are worth repeating:

1. We have had four consecutive month of increased sales activity.

2. Inventory is the lowest it has been since December, 2007.

3. Last month, the prices of homes showed their first increase since December, 2007.

The bottom line is prices have bottomed out and may be poised to begin increasing.
We are returning to a more "normal" market here, which is good news for all.


Sidenotes:

Our preferred lender, Franklin Loan Center discussed the latest news in financing. Obtaining credit to purchase a home can be challenging. If you have any questions or concerns, please contact me for assistance.

Two local appraisers addressed our group and spoke of their challenges reporting to banks and explained how we can help them and our clients with improving accuracy in appraisals.

Palm Springs Real Estate Market Heating Up!

The temperatures are well over 100 degrees here in the desert and the real estate market is hot as well. Sales continue to flourish. The last four months have been outstanding.

Look at these figures for number of homes sold so far in 2009:

January 492
February 625
March 693
April 827
May 839
June 826

Inventory throughout the valley is down to 5,800 as opposed to more than 12,000 a little over a year ago.

June of 2007 reflected a 17 months supply of inventory in the valley.
June of 2008 reflected a 13 months supply of inventory in the valley.
June of 2009 shows a 5.4 months supply of inventory.

My Keller Williams La Quinta office was #1 in the valley in the number of closed sales for the month of June. That is the second consecutive month we have earned that honor.

Our Keller Williams Rancho Mirage office was #1 in highest dollar amount of closed sales in the valley for June.

Why such an increase in sales? The prices have dropped. Lower prices, increased sales.

Two years ago in June, 2007 the median price of a home here was $405,000.
Today it is $194,500. That is a 52% drop.

If you know someone who is interested in Palm Springs real estate, please share this information with them. Also, please introduce them to me. I would love to share more information and help them take advantage of these great buying opportunities here in the desert.