I’m not looking for specific legal advice, just some generalities on what my avenues are for recourse.
I’ve been in negotiations to buy my first house, with a real estate agent of my acquaintance looking after my interests. I’ve got a signed contract for a specific property, have lined up financing, and had set a closing date of the 25th of September.
Today I was told by my representative that the seller cannot go forward, due to there being a large difference (approx. $30K) between what she owes on the house after settlement of her mortgage and my offer. The offer was perfectly reasonable for the specific property, is backed up by an appraisal, and in any event was agreed to by the seller. Essentially, the seller now wants another month to attempt to work out a deal with her lender that can fill the gap between what she owes and what I offered. It is not sure that such a deal can be worked out, and the lender may choose to foreclose instead.
My problems are these: 1) my financing deal is contingent on closing no later than the 27th, or the terms will have to be renegotiated; 2) I’ve already informed the management of the apartment complex I’m living in that I will terminate my lease by mid-October, and will likely have to go-month-to-month at a higher rental rate if I delay the transaction; an 3) although I should be able to get back my earnest money without dispute if I terminate the contract, I will be out at least $700 I’ve spent on a home inspection and appraisal.
My question, therefore, is, would it be better to terminate the contract, look for another place and and eat my losses, or sue for damages and/or specific performance of the contract?
IANAL, but we did have a buyer walk away after signing the contract once. Not a damn thing we could do. You could sue for performance, but it would be years before you got satisfaction. No judge is going to toss someone out of her house without a lot of consideration - which takes time.
My question is : WTF was her real estate agent doing? Didn’t the agent know that this woman couldn’t afford to sell the house at the agreed on price?
My suggestion would be to negotiate compensation for your expenses in return for letting her out of the contract. It’s worth a try. $700 is not all that much, though you can try for some more for the extra cost of renting.
Question 2: Are house prices dropping that much where you live? Or did she overextend herself on equity loans?
I didn’t have to do it, but when oil crashed in Louisiana and Texas around 1980 a lot of people just walked away from their mortgages. That doesn’t help you any, though.
Apparently not, and I’m definitely more pissed at the agent than the seller herself. One thing I am sure to do is contact an appropriate authority to make sure this is known.
That’s what I’m leaning toward doing, but I’ll let them sweat it out over the weekend. At this point, where I’ve left things (by phone message) is that I’m going to enforce the contract.
My guess is overextension. A lot of houses have changed hands over the past year in this development, which is only three years old, and there have been several foreclosures. I interpret that as the original developer making deals with a lot of people who really couldn’t quite afford what they were buying and took disadvantageous mortgage terms.
Actually, I’m just looking opinions on the best approach to take from anyone who might have found themselves in a similar situation. I like the house, and I appear to have grounds to sue if I want to, but the main question is whether the greater expense and time (on top of what I put into this so far) is worth it. If I can get my earnest money back plus some consideration for the other expenses I’ve incurred, that would be sufficient, I think.
I suspect that Random was suggesting that the OP needs to obtain legal advice from a lawyer retained for that purpose, not that the OP should be asking for legal advice on these boards.
I’m no expert, but from practical experience I think you’ll be doing very good if you can convince the seller to reimburse even part of your inspection money. If you want to be indemnified against any expenses associated w/ the transaction, then I think that should be negotiated up front. IMHO, suing would be an effort in futility.
I am not a lawyer, but I am a commercial real estate agent, and I have seen scenarios where buyers and sellers sued to force specific performance. These are usually expensive, and drawn out procedures, and (IMO) are of questionable utility unless there is some truly significant loss entailed in the non-performance, (which occasionally there is with commercial real estate).
With respect to residential property, unless you have an absolute world beater of a deal I think the best course of action is to recover as much of your expenses as possible and move on. Getting enmeshed in a situation where the seller cannot get out from under, and has no funds to pay off the difference is not where you want to be. In the end the additional costs to acquire the house and the delays involved would typically make the deal unappealing.
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As a side note why would you think the Seller’s agent would necessarily be at fault here? The Seller’s agent is not responsible for knowing what the Seller’s mortgage payoff is, the agent is responsible for finding a buyer for the property at the price the Seller specifies. The Seller’s loan payoff and any differentials involved are typically items left to he common sense of the Seller.
I’ve never had a conversation with any of my Sellers where I felt the need to ask them “Now are you sure this sales amount is enough to pay off your mortgage on the property?”. This is entirely the Seller’s responsibility. Not even knowing what your own mortgage payoff is before you list a property for sale requires a near Gumplike level of stupidity.
Agreed. After a couple more phone calls today, the story from the seller’s agent has now changed again. This time it is that the seller hasn’t made any mortgage payments for “several months” and that the house is pretty much guaranteed to go into foreclosure. I’m throwing in the towel on this deal; the market’s not particularly tight anyway. My response made before I saw your post, was pretty much what you suggested; return of earnest money plus consideration for the amount I’m out of pocket for the inspection and appraisal. I’ll know by the end of the day Monday how this all plays out.
Well, I’ll freely admit that maybe I’m missing the nuances of the agent’s role here, but I find it a bit bizarre that an agent would take on the job of finding a buyer for a house that simply cannot be sold based on the seller’s current situation. It would seem to me the agent is now out any income she might have made on this transaction as well.
In any event, I’m sure you are correct that this is all on the seller, but I remain a bit annoyed over the general lack of communication and the changing stories by the seller’s agent.
Or maybe, just blind, unthinking desperation, but I suspect you may have gotten to the heart of the matter.