Posted by Natalie-VA on June 06, 2007 at 05:44:58:
Sounds like good advice from the lawyer this time.
–Natalie
buyers backed out … really need some help (long) - Posted by James
Posted by James on June 01, 2007 at 15:11:27:
Here is the situation, any info would be great as to the corse of action to take.
I had a buyer put a contract on my home.( so far all is well). After alil back and forth we lowered the price by $10k. once that was completed they made the contract contingent on me fixing the basement. They wanted it waterproofed. it is an unfinishable basment that really is a glorified crawl space. However i agreed to pay $5000 to have a company come in and waterproof the basement. The house appraised at enough money (250k) for the bank to qualify the buyers. they were approved. We had the home inspection. Once the inspection was complete the buyers had until midnight of the 22nd to fax over any repairs they wanted us to do. the 22nd came and went. We as the seller figured since we lowered the price 10k and fixed the basement out of our own pocket for 5k that they didnt want anything fixed. the 23rd at 10pm they send over a list of every item on the home inspection for us to fix. My agent called their agent to advise that she and her buyers missed the deadline( she stated that she was out of town, but the singatures were dated the 22nd…And there are 2 agents working for them). by contract we are not obligated to fix anything. However , to make everyone happy we decided to offer to fix some items. My agent got together with their agent to meet up at the property. We all met up and went thru the house item by item to prove to the buyer that everything is good and we agree on what to fix. the buyers wife “had to work” that day so it was just the husband. they agreed to fax over another list of repairs signed by both of them which we would complete. instead of a list they sent over a letter stating the buyers are backing out. we called the buyers agent manager who said she is sorry her clients have no outs to get out legally and she appologizes but we will have to sue them if we want. now here we are 1 week until closing and the said if we dont let them out they just wont show up at closing. Now here is where it gets tricky. I called my lawyer who told me if i want to sue them chances are i will win the money we put out for the basement and possible holding cost until we sell and maybe for the difference if we have to sell lower. BUT, if we sue them we cannot sell the house until the case settles. on top of that he is $230/hour. And there is no gaurantee we will be paid by them. I’m not maid of money nor time but it just seems there has to be something i can do. otherwise what good was the contract if one party just decides not to uphold their part. I’m really stuck right now. How can a buyer just walk and nothing can happen to them? We really went above our call of duty for them . by the way they want to split their $1000 deposit 50/50. Its almost a joke if it were not really happening. Also, if it helps im in Maryland. Sorry for being so long but not sure where to turn.
James
Re: buyers backed out - Posted by Natalie-VA
Posted by Natalie-VA on June 05, 2007 at 09:39:19:
James,
Please let us know how this plays out. I agree with Rich that if repairs are going to be that much money, they buyers can do them after closing. Some lenders don’t like to see a repair credit, so we would give them closing cost assistance instead. Anne is right too, your agent did you no favors by not asking for enough earnest money to cover your expenses.
–Natalie
Re: buyers backed out … really need some help - Posted by Rich-CA
Posted by Rich-CA on June 02, 2007 at 20:47:58:
I never do repairs for a buyer except minor ones. I credit funds for repairs so they can do them their way or not at all. I don’t want to spend anything on a person until they can’t back out - and that means after closing.
Re: buyers backed out … help (long) - Posted by IB (NJ)
Posted by IB (NJ) on June 02, 2007 at 09:11:19:
Anne brings up a good point. Your broker did you a serious injustice by permitting buyers to only put a $1000 earnest money deposit down on a $250k purchase. The minumum really should have been $25k (10%). They would have thought twice before trying to back out with just a fax with all that money on the line. To me that $1k earnest money deposit really took the incentive away from your buyers to stay with the deal. They had nothing to lose.
Re: buyers backed out … - Posted by Anne_ND
Posted by Anne_ND on June 02, 2007 at 05:30:36:
James,
Here’s where a good realtor could have helped you out.
Before spending so much on improvements and repairs for this buyer you should have gotten more money as earnest money. I’m surprised that your realtor didn’t insist on more money down, and I’m surprised that they didn’t continue to aggressively advertise and show the property given the flakiness of the buyers and their agents.
That said, I suggest you move past this, forget about suing, but talk to the brokers involved and let them know you are not happy with how this was handled- especially by the buyer’s agent who missed the deadline, but expected you to make good on your part of the deal.
It might be worthless to file something with the BoR, but that’s also an option.
I would also expect to lose the $1000, but do not give it back to the buyers. If you don’t release it, it will sit gathering dust and interest in the broker’s escrow account/party fund. You won’t get it, but neither will the buyers. At least that’s the way that it works where I am. I would take a very no-nonsense tone with the buyer’s agent about the fact that his/her buyer isn’t getting the money back.
Good luck with getting your house sold- sounds like the improvements you made could make it sell faster now.
Anne
Re: buyers backed out … need help - Posted by Sailor
Posted by Sailor on June 01, 2007 at 18:05:54:
I’m not a lawyer, but am puzzled that yours said you can’t sell
your house if you sue. I don’t know that it is possible to make a
buyer perform, but you obviously have suffered damages. I think
you need an attorney who specializes in RE so that you truly know
your legal position. There is a lot of $$$ & anguish here (I know
because it has happened to me), but you need to invest the effort
to find out what is really going on. It probably has nothing
whatsoever to do w/repairs. I’m surprised the broker is not
involved because there is a commission owed. I’d schedule a mtg
NOW w/agents + brokers & see if you can’t join together to
mitigate damages.
Once you know your legal position (& once you have some good
referrals you can probably arrange a FREE initial consultation to
determine that), you can pay to have him/her contact the would-
be buyers on your behalf. That might be all that is necessary. If
that doesn’t work you can always sue in small claims court for
some compensation. In the meantime, get that house SOLD
again.
When you are no longer in panic mode & have gained a bit of
perspective, take the time to figure out what you have learned &
put those hard-earned lessons to work for you on your next deal.
Good luck & keep us posted–
Tye
Re: buyers backed out … really need some help - Posted by David C. Cooper
Posted by David C. Cooper on June 01, 2007 at 15:49:29:
If your lawyer is so sure you will win, ask him to take the case on the contigency that you will win and include attorney fees in the damages.
I hate the attitude people seem to have that they can just back out of a legal agreement without paying the consequences. It seems buyers try to pull this kind of thing a lot, but when you look at the news it’s always the “evil investors” who are out to scam everyone. Investors are even demonized just for doing exactly what they agreed to do in writing!
Earnest money - Posted by Rich-CA
Posted by Rich-CA on June 02, 2007 at 20:53:00:
I have bought quite a few houses and never been asked for more than $1k in earnest money - including houses over $280k. At this point in the market, asking for a high earnest deposit is not likely to produce any buyers - there is plenty of inventory on the market. I’ve even seen some accepting promissory notes for earnest deposits.
Re: buyers backed out … need help - Posted by Anne_ND
Posted by Anne_ND on June 02, 2007 at 05:21:35:
Hi Tye,
In at least some states (including ND), you cannot sell a property if you are party to a lawsuit- even one that does not involve the property under contract.
Anne
Re: buyers backed out … really need some help - Posted by James
Posted by James on June 01, 2007 at 17:36:14:
I’m sure thats not a problem. But its more of the issue of having to pay him even if i dont actually collect from the buyer. I can win, but thats doesnt make them pay. And if it gets drawn out for months then i have to hold it until the case is done with. Hence losing more money holding the house. it seems as if the system is set up to protect the people causing the trouble…
Re: Earnest money - Posted by IB (NJ)
Posted by IB (NJ) on June 03, 2007 at 13:41:24:
Hi Rich. On most of my deals (unless the seller asks) I personally don’t pay an earnest money deposit at all when I buy. However, when I sell (I mostly wholesale and rarely sell retail) I require 10% EM. However, I will settle for 5%. On a $250k purchase, despite the market, you would have to put more than .4% ($1000) down as EM for me to take you seriously and go under contract. I need to see AT LEAST $10K. That way I know you won’t just walk away from $10k simply because you wake up inthe morning and decide that today is a good day for you to leave someone high and dry.
How much do you require someone to put down when you sell a property? Just curious.
Ib
Re: buyers backed out … need help - Posted by Sailor
Posted by Sailor on June 02, 2007 at 06:00:38:
Interesting, Anne. I wonder if you can sell & then sue for damages incurred. We just had a successful local case in NC, where the seller backed out & sold to someone else. I know the plaintiff, who is pleased he won over 50k. The defendant is also happy because he made more than 50k selling to the other buyer. They are still friends.
When I had a seller try to back out last fall, my agent cited the case to him & told him that I had requested the agent to FAX my contract to my attorney. Within hours my deal was back on.
I wouldn’t have sued because (1) I wasn’t out anything so early in the deal & (2) I knew I couldn’t make the guy sell. However, it was the appearance that I COULD do something not-so-fun that cured a case of seller’s remorse. Note that if there had been a valid reason for the guy wanting out of the deal I’d have let it go because we were only a week into escrow & he offered to cover any expenses of mine. I might have been cranky for a day or so about losing a deal, but things happen.
However, in the original post it sure smelled to me like the buyers were not being honest (my 1st guess would be that they lost their funding), the seller had significant $$$ losses, & it was @ the tail end of the deal. Very bad buyer form. Years ago, I lost a sale of my residence 3 days before escrow closed, & my bed had already been sold. Turned out to be a crooked broker in a ring that not only defrauded investors, but sellers & mortgage companies. The reasons it wasn’t prosecuted: (1) the mortgage co. plain-old didn’t care about fraudulent applications, & (2) the ADA on the case was in the National Guard & got called up for the 1st Gulf War. It was California, where RE fraud has always been rampant.
I figure investors are responsible for checking out their own deals, but I get really griped when an individual homeowner gets hit, either deliberately or when the other party is unresponsible. I think folks should play nice–
Tye
Re: buyers backed out … really need some help - Posted by James
Posted by James on June 02, 2007 at 08:08:27:
just to give you an update. I called my agent and told him I want to have a meeting with him, his manager, the buyer the buyers agent and the agents manager and my lawyer… called in a favor from a friend who is a lawyer but not a real estate lawyer ( but hey maybe just having him there with all the lawyer talk will help them see things clearer). I also requested it to be at the property if at all possible. I figure at the very least everyone will be able to see the condition of the house and the repairs i have made. Best case senerio maybe we can “inform” the buyers that this is not something to take lightly and maybe get them to closing. And if nothing comes of it then olwell. Atleast they have to look me in the eye. So we will see … thanks for all the advice
Re: Earnest money - Posted by Kristine-CA
Posted by Kristine-CA on June 03, 2007 at 18:51:20:
IB: I’m with you on the earnest money. I only put it in the contract if
required (by courts) or requested by the seller.
When I sell, my minimum is 5K, no matter the purchase price (usually
under $150K). Period. This eliminates MANY buyers. I learned this
one the hard way. Rehabbers and other investors are always shopping
the properties around during escrow. That’s their right, but I’m going
to be paid if they back out.
5K isn’t much, but it will cover points and fees for using hard money at
the last minute when I have to close myself in a double close situation.
Or, if I own it, it’s my fee for having the property off the market. We
are are in a downslide now and comps are going lower every day
because of the sub-prime lender REOs coming onto the market. It will
stablize, eventually, of course. But back in the day (2005/6) when I
would lose a buyer, it wasn’t that big of a deal because there was
appreciation every month. No longer.
Hope all is well in NJ, Kristine
Re: Earnest money - Posted by Rich-CA
Posted by Rich-CA on June 03, 2007 at 16:14:29:
I require whatever is customary for the local market. I sell retail and buy either foreclosure or distressed retail, so I only pay what is customary. I personally will not put down more than $1,000 for earnest money, but have put down less. Under seller favorable market conditions, I was never asked for more and would not offer it. Under current conditions, its a great way to get rid of a seller.
For example, I just sold an SFH in Phoenix. My competition within 2 miles was 103 3BR and 13 4BR. It took 3 months and some things nobody else was willing to do to move the property. I sold before houses that had already been on the market a couple of months at slightly lower prices on the same street. If I had asked for more, my buyer would have evaporated. plenty of inventory on the market.
In the retail market many buyers are A- (not quite sub prime, but still zero down). You can’t ask what they don’t have and expect a sale.
Perhaps wholesaling is different. if you can get away with it, great. But if you can’t…
Re: buyers backed out … really need some help - Posted by Sailor
Posted by Sailor on June 02, 2007 at 09:38:20:
Good for you, James. I always prefer action mode, rather than waiting for things to happen or unhappen. This way you’ll know for sure that you tried, even if it’s a bust. Keep us updated–
Tye
update… - Posted by James
Posted by James on June 05, 2007 at 20:22:35:
Well as of right now. Their agents has contacted my agent asking him if we will “please” let the buyers out of the contract…they are sorry…and now their lease is running out and they will have no place to live. ( i find that funny because if they buy my house they will have a place to live.) My agents told them we have contacted a lawyer and they will be hearing from us. Their agent said she has tried to talk them into buying but they dont want to buy a house they dont feel is safe.
I did contact a lawyer who gave me the following advice. To get another buyer asap. When that buyer sends over a contract , if it is less them my current contract amount to contact the old buyers and let them know that we will be sueing them for the difference of price, the basement costs , and any holding fees we have occured during that time. If at that time the old buyers agree to buy the house and not be sued we can then sell it to them. If they still do not want to buy, then we will sell to the “new buyers” and once closed we will pursue the “old buyers” for our damages.
My lawyer said he has been to plenty of mediations and most of the time nothing is resolved since there is no right and wrong decided. Its only to try to find a happy medium. However, since we know they do not want to find a happy medium it is a waste of $350 of my own money.
So basically we are at a stand still until we get another contract in. But at the very least ( and for what its worth) the buyers are getting some stress out of this as well sinc ethey have to be out of they apartment on the 15th. So hopefully when their agent lets them know have alawyer and are pursuing them , who knows they just might come to their senses…but im not holding my breath!..