We are buying an reo property and need to extend the escrow approximately 1 week. The selling bank is willing to make an addendum to extend the escrow but wants to add the language that the deposit "now becomes non-refundable". We don't understand why the seller wants to have that phrase since by definition, the money became hard once we signed away all our contingencies.
Question is: why is the seller demanding to have that language, and should we stand our ground and demand to have just a clean addendum to extend the escrow?

The seller is paranoid and may not be working through an attorney who would advise him that such a clause is moot, since the money is already non refundable.

If you understand its moot, why not just humor him?

Tell them you'll agree to that clause with the addition "except in the event that seller fails or refuses to close".