THE EARNEST MONEY TRAP

Once upon a time, a broker was about to close what looked like a relatively smooth deal.

After weeks of negotiation, the buyer and seller finally agreed on the price. To formalize the deal, the seller required 10% of the purchase price as earnest money — amounting to several million pesos. The buyer pushed back. The broker, fearing that asking for another concession might derail the sale, explained that 10% is common practice in many transactions, especially when the seller wants strong proof of commitment. Still uncomfortable with the amount, the buyer offered Php500,000 instead.

The broker relayed the request, cautiously.

The seller surprisingly agreed.

They met in person. Pleasantries were exchanged. The buyer paid Php500,000 and they signed a Contract to Sell (CTS). The seller said they needed two months to settle the existing mortgage on the property before closing.

The buyer waited.

As the deadline approached, the seller asked for an additional 30 days to clear the loan. The buyer, though uneasy, agreed. Thirty days passed. Another extension was requested. The buyer agreed again — reluctantly.

After the second extension, there were still no concrete updates. No loan settlement. No closing date.

Frustrated, the buyer instructed the broker: cancel the transaction and demand the return of the earnest money.

The seller asked for more time.

The buyer refused. “Return my money.”

It was only then that the full picture became clear. The property was already under foreclosure proceedings. That was the real reason for the delays.

And here’s the painful part:

The seller had already spent the earnest money.

When deals drag beyond agreed timelines, it’s rarely just a “delay.” It’s often a symptom of a deeper problem — legal, financial, or both.

Lessons will be posted tomorrow.