Protecting a Buyer’s Earnest Money: What to Do When Issues with the Seller’s Title Arise

Protecting a Buyer’s Earnest Money: What to Do When Issues with the Seller’s Title Arise

You represent a Buyer & the Closing Attorney informs you that there is an issue with the Seller’s Title…. what do you do to protect the Buyer’s Earnest Money? The following is a synopsis of the latest episode of “Real Estate Made Crystal Clear” with our very own Dana Sparks. You can watch the video in its entirety below.

Buying a home is a complex process that requires careful attention to detail, especially when it comes to the purchase and sale agreement. One of the most critical parts of this agreement is the title section, which outlines the seller’s obligation to convey good and marketable title to the buyer. However, what happens if an issue with the title arises? In this blog post, we will discuss how to protect a buyer’s earnest money in this situation.

Understanding the GAR Purchase and Sale Agreement

The Georgia Association of Realtors (GAR) purchase and sale agreement is a comprehensive document that provides guidance for the buying and selling of residential properties in Georgia. In particular, paragraph B1 of the agreement addresses the issue of title. It states that the seller warrants that they will convey good and marketable title to the property to the buyer, subject only to specific zoning and utility records, declarations of the condo, and leases or other encumbrances specified in the agreement. The buyer can examine the title and provide a written statement of title objections at or prior to the closing.

Protecting the Buyer’s Earnest Money: What to Do

If an issue with the seller’s title arises, the buyer’s agent must ensure that the buyer follows the instructions set out in the GAR purchase and sale agreement. Once the closing attorney informs the buyer that there is a title issue, the buyer must provide the seller with a written statement of title objections. Failure to do so can put the buyer’s earnest money at risk, and the buyer may face termination of the agreement, leading to default.

Using the GAR Form 816 Notice

To protect the buyer’s earnest money, the buyer’s agent must use the GAR Form 816 Notice, which is a unilateral form that only requires the buyer’s signature. The notice should reference paragraph B1 of the purchase and sale agreement and outline the title objection, giving the seller a chance to remedy the issue before closing.

In conclusion, protecting a buyer’s earnest money is crucial when dealing with issues related to the seller’s title. By following the instructions set out in the GAR purchase and sale agreement, buyers can protect their interests and ensure a smooth closing process. The GAR Form 816 Notice is an essential tool that helps buyers communicate their title objections to the seller and protects their earnest money.

Watch the entire video for more information here:


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