What May a Seller Do If a Buyer Flees After Paying a Token Amount For Property?
Token Amount For Property- A seller should document all token money-related facts to ensure a seamless property sale. Real estate investments take serious thought. After conducting due diligence and legal checks, a potential buyer must pay a token fee to the seller to assure that the seller does not approach another buyer. However, not all real estate deals are successful, and a seller may encounter an unforeseen occurrence, as in the instance of V Sumit.
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Sumit, a Vashi resident, was preparing to sell his two-bedroom flat that he co-owned with his sister. He put the property on an online site, and after a few meetings with the buyer, the sale was agreed upon. Sumit accepted Rs 1 lakh as a token payment for the transaction, with the agreement of sale to be signed within 20 days. A day prior to signing the contract, Sumit tried to get in touch with the buyer but got no answer; the buyer simply blacklisted him.
There have been countless cases where a buyer flees after completing this payment, leaving the seller stunned and facing financial and legal repercussions. This tutorial focusses on what a seller can do if the buyer has ghosted them.
What is token money?
Token money is similar to an initial deposit that the buyer pays to the seller at the start of the transaction to confirm his interest in purchasing the property. This initial agreement is around 1-5% of the property’s worth and is legal to accept. While this may or may not be included in the sale agreement and sale deed depending on local real estate standards, for a legal holding, the token money transaction is notarized & transferred to a third-party escrow account until the transaction is completed. It should be noted that if the buyer withdraws from the transaction after receiving a token payment, the transaction is fortified. It is refunded only if the seller backs out of the transaction.
What variables should be evaluated before the seller receives token funds?
Follow the legal requirements.
Understand the local token money norms and charge token money in accordance with market standards to avoid any arguments.
Token money will be taken.
While there is no specific criterion for determining token money. It is a good idea to use token money based on market rates. Token money can also be determined by considerations such as property valuation and the buyer’s financial situation, among others.
Receipt of token money taken.
Once a seller receives the token money, he should provide the customer a receipt and save a duplicate for himself. This is vital for litigation, estimating the final property cost, and so on.
Conditions and Clauses
While notarizing the agreement for token money, terms should be included that specify details about situations and dates for when the token money can be repaid and when a seller can keep it.
Steps a seller should take if the buyer absconds after paying token money.
If the vendor accepts the token money and the customer flees, he is in a difficult position. Since the token money has been taken, the property has been booked. However, in the absence of the buyer, how can the seller proceed with the sale? Here are a few alternative solutions:
Review the notarized document.
When the seller receives confirmation that the buyer has withdrawn from the transaction, he must first read the notarized document and grasp the legalities pertaining to breach of contract. In most situations, the seller is permitted to retain some or all of the token money (depending on how soon or late he was notified). As compensation for the loss experienced while the property was off the market.
Legal action.
If the buyer flees for dishonest reasons, the seller may bring a lawsuit against the buyer and seek restitution for financial loss, missed opportunities to sell, and money spent on paperwork.
Seek clarification.
There may be a valid reason why the buyer is unable to proceed with the property purchase. In such instances, a seller can arrange a meeting with the buyer to understand the situation and determine how he can best assist the buyer. If the seller recognizes that the transaction cannot proceed. He may decide whether he wants to retain the token money partially or refund it totally to the buyer (depending on the case to case basis).
List the property for sale again.
With the buyer absconding but the property yet to be sold. The seller should not waste any time and begin the process of selling the property all over again by listing it. It is important to note that this recovery window should be relatively brief so that the loss of having the property off the market is absorbed & the seller does not incur significant damages.
Precautions a seller should take before accepting token money from the buyer.
Screening the Buyer
Before starting with the transaction, a seller should investigate the buyer’s past. Intent to purchase the property, and financial strength to avoid any unpleasant surprises.
Cancellation deed
When a seller receives the token money, he or she should sign a cancellation agreement. With the buyer that specifies the terms that will apply if the transaction does not go through. The deed should specify how long the seller should wait for the buyer before cancelling the transaction. It should also state that if the agreement fails due to the buyer. The seller may keep the token money as compensation and pursue other sale options.
Escrow account
Having an escrow account where the token money will be sent provides further security. With this, the buyer can be confident that the money is held by a third party and will not be exploited.
Navimumbaihouses.com Point of View
A token sum of money is paid to hold a property. If a buyer or seller is unwilling to proceed with the transaction after paying the token money. The agreement can be terminated in accordance with the previously agreed-upon terms and conditions. When all else fails, the seller may pursue legal action to either complete the transaction or demand recompense.
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