Condo - 2 days before closing buyer refuses to buy

[Vov86]

Here's my situation. I sold a condo on April 5, the closing day is this Friday, May 29. Yesterday I met with my lawyer and signed all the papers and gave them my keys to the unit.

A few hours ago the real estate agent called me and told me he has some bad news for me. Apparently the buyer was supposed to sell another property in order to qualify for mortgage and they couldn't do it. It is very strange, I mean did they just find out that they won't be able to sell today ? They should have known by now.

I was just wondering if anyone else was in the similar situation ? What can I do ? Should I try and work out some kind of extension with them and move the closing day 1-2 months ? Or should I just walk off and relist the property ?

Their deposit for my unit was $5000. In case I decide not to wait another month, what are my options ? Do I get to keep a deposit ? I'm waiting for my lawyer to get back to me and explain what can be done but in the meantime I would appreciate all comments or advices. Perhaps someone was in a similar situation. Thanks in advance.

[adamtheman]

First off, that is a very crappy situation, but unfortunately it does happen all too often.

In my mind, you only have two options. I would not try and negotiate with the buyers, because they obviously cannot sell their house (and it won't happen overnight) and the bank obviously is not willing to give them bridge financing.

#1) Give him back his deposit, walk away from it and move on.

#2) Take him to small claims court and sue him for damages caused by breach of contract. Damages are really unlimited (except for small claims court limits) depending on what you can prove. For instance, if you purchased another house and you have bridge financing, and were relying on the buyers completing, then they can be liable for those damages. You can also sue for what you feel you were inconvenienced for, such as travel time and all kinds of other things. You can also sue IF the property value has decreased since you sold it to them. For instance, if you sold it for $250,000 2 months ago and you re-list it and eventually sell it for $240,000, then you can sue them for the difference and they WILL be responsible for it. Breaching a contract of sale is a very serious thing and buyers often don't take it serious enough.

His deposit will be held in trust for now. It is in limbo and will not be released to either of you. In order for it to be released to you, you will need to get a court order. This is why having a sizeable down payment is advisable, because even if the buyers go bankrupt, you will still have that $5,000 in trust for which you can sue them for and likely obtain. Still, even if you manage to get the $5,000, the buyers likely will still walk away and the time of going to court is going to be costly.

My advice is as follows....

If the condo has decreased in value, you should sue them. However, if you can sell the condo for the same price now, or more, then I would try and work out a deal with the buyers privately. Tell them you will allow them out of the contract with no further damages if they sign over the $5,000 in trust to you. If they say no, offer to split it ($2500 each) and if they still say no, then it's up to you to sue them if you want. Small claims court can still be costly (not just money but time). Sometimes it is better to cut your lossess. You really need to figure out what lossess you have suffered. Property value will be the biggest one... but if your property hasn't decreased in value then I would just move on and try and get as much of the deposit as possible.

[adamtheman]

I also want to add - your realtor CANNOT help you at all, even if he isn't acting as a dual agent. The reason is, realtors cannot give legal advice and basically once a contract goes south, the realtors shrug their shoulders and move on. So don't blame your realtor if he seems useless because he pretty much is. You will need to hire your own lawyer. Or, if the real estate firm is large enough, they may have a lawyer on staff who can assist with the situation, but he will only go so far as writing a few letters. Remember, the realtor is loosing his/her commission too. If your realtor is part of a big firm I would ask if there is a lawyer on staff who can give you a free consultation.

If your realtor is acting as a dual agent (for both you and the other party) then he will likely cease involvement in the situation completely and the firm cannot provide a lawyer to you, so you'll need to hire your own if you take him to court. Small claims court of course does not require a lawyer, so it might be worth taking him yourself. If you are going to take him to small claims, FILE NOW as the wait list is very long...

[xGambitx]

I was in a similar situation with me being the seller. The buyer couldn't get his mortgage approved. I TOTALLY agree with the poster above, you dont really want to go to court with this since this could get really costly and more importantly time consuming. However what happened in our case was that we were able to give them an extension (I think it was about 4-5 days or 1 week at most). The good thing, we were able to get 1500$ from the buyers due to damages. ie. mortgage payments and time wastage and what not.

Hope that helped.!

[MoreMiles]

Isn't that the reason to retain a lawyer for real estate transaction? Ask your lawyer to write a nasty and threatening letter on your behalf.

If there was no condition for selling their house first or getting financing, any excuse is simply that, an excuse. They are trying to break a contract.

[MoreMiles]

Remember, many people have to pay two mortgages in situation like yours. It's not your fault that they want to sell their current house. Your buyer is trying to take advantage of you!

[i6s1]

Sue. And next time, don't let the deposit go into trust. Write the contract so that the deposit becomes property of the seller if the sale isn't completed. I can't belive that the standard contract has the deposit put in trust.

[Germack]

If you have or will have any damages out of this I would sue them. You are going to win and they will have to pay all your expenses.

[Vov86]

Germack, i6s1, MoreMiles, xGambitx, adamtheman,

Thank you for your replies, much appreciated. I will try to work out a one week extension and if it doesn't work, will have to sue them. Once again thanks a lot for all feedback.

[Impossibles]

Hold the phone...

Was one of the subjects in the contract that they had to find a buyer for their other home?

[duner]

Hold the phone...

Was one of the subjects in the contract that they had to find a buyer for their other home?

Most real estate contracts have a financing clause in it. If they are not able to get financing b/c they are not able to sell their house, then you're probably SOL.

[budfrogs]

Most real estate contracts have a financing clause in it. If they are not able to get financing b/c they are not able to sell their house, then you're probably SOL.

This is what I was thinking! If the contract was well written by the purchaser there will be a financing clause in there unless they already waved it!

You may be screwed! Be sure you have/keep a copy of the purchase agreement!

[karlanda]

First, the buyer will lose their deposit. The deposit is there in the first place so that you cannot turn around and sell the place to someone else if someone else offers you a higher bid later on. So I would consider the money as yours. Second, you have no obligation of extending the deadline, however it may be wise to do so since that will save you the hassle of going back to square one and finding a new buyer. What I would do is require the buyer to put down another $5000 deposit to extend the deadline. I would also renegotiate with your real estate agent on their commission. I would knock off 2%. Of course they will say no way it is not possible, then you say fine I'll find another agent. Then they will back peddle and agree because it comes down to this...no closed deal=no commission. And they worked too hard and put in too much time for this to fall thru especially when its 90% a sure thing. This happened to me years back and I ended up cutting the commision by half. In order to get the deal closed each agent too half off their commission. Good luck

[Vov86]

Hold the phone...

Was one of the subjects in the contract that they had to find a buyer for their other home?

No, it wasn't there. All it said that the offer is conditional upon the buyer arranging a new mortgage within 5 banking days of acceptance of the offer. After 5 days they sent me an amendment removing that condition. Both my agent and my lawyer said that after signing that amendment there should be problems with financing. That's why I'm very surprised now they suddenly started having these problems two days before the closing.

[Vov86]

First, the buyer will lose their deposit. The deposit is there in the first place so that you cannot turn around and sell the place to someone else if someone else offers you a higher bid later on. So I would consider the money as yours. Second, you have no obligation of extending the deadline, however it may be wise to do so since that will save you the hassle of going back to square one and finding a new buyer. What I would do is require the buyer to put down another $5000 deposit to extend the deadline. I would also renegotiate with your real estate agent on their commission. I would knock off 2%. Of course they will say no way it is not possible, then you say fine I'll find another agent. Then they will back peddle and agree because it comes down to this...no closed deal=no commission. And they worked too hard and put in too much time for this to fall thru especially when its 90% a sure thing. This happened to me years back and I ended up cutting the commision by half. In order to get the deal closed each agent too half off their commission. Good luck

Thank you for your advice. I will try that as well. Hopefully I will somehow be able to get out of this mess and eventually sell the place.

[hugh_da_man]

Have the prices dropped much since you sold? Maybe the buyer is backing out because of the price?

The worst part about suing is collecting any money that you win. I've heard horror stories...it's probably best to try to negotiate an extension if the buyer is really being honest about their situation.

[BAM]

Deposit is yours now if as you say buyer removed any condition pertaining to financing. Those conditions are usually there for the protection of the buyer and if he eliminated it - tough luck.

[Icedawn]

Run, don't walk to your lawyer about this.

The law on this is sufficiently convoluted that there's pretty much no chance you'll get the full answer online.

[ShopSmart]

Unless someone has really really wronged you or your family or has done something that must be brought to justice in order to keep them from re-offending or ripping other people off, is it really worth it to sue for $ or threaten people over a couple thousand dollars?

[83_gemini]

The correct answer:

Tell your lawyer. The reason you a hire a lawyer in a real estate transaction is so you can be properly advised regarding how to properly extend deadlines (i.e. to maintain Time is of the Essence and the like), or seek remedies.

The deposit is put into trust for several reasons, but one reason is to avoid fraud (i.e. one party walking away with the deposit).

[Bullseye]

My mother had a buyer walk out on her on the closing day last year. She started legal action, and the buyer eventually settled (most legal issues never make it to court), paying around $40k in damages and legal costs.

Buyers who walk out usually don't have a legal leg to stand on, have your lawyer get moving on this.

As above said, your biggest problem will likely be collecting on the settlement.

[King of Clones]

I would think it would all depend on the original Purchase and Sales agreement you both should have signed, on April 5th. If he had any brains he would have put a clause in there stating deal pending if he could sell his own house. If he didn't, and he broke the contract, which he did, the 5 grand is yours.

[urban1]

Be aggressive with your real estate lawyer to make sure hes on this issue promptly and following up as needed.

Its hard to know if the other party is being honest and cant meet the conditions or if they want to back out of the deal. If the value of the property has dropped significantly they may be wrongly assuming that the $5000 deposit will be the limit of their liability and are willing to walk away from it.

-Talk to your lawyer for legal advice.
-If your considering giving an extension or working with the buyer, talk to your real estate agent and ask them what sort of vibe they are getting from the buyers agent to evaluate if theyre just playing you or actually wanting to follow through with the purchase

[MoreMiles]

Unless someone has really really wronged you or your family or has done something that must be brought to justice in order to keep them from re-offending or ripping other people off, is it really worth it to sue for $ or threaten people over a couple thousand dollars?
$2000?

The house might have dropped $100,000 in value since the contract time. Who is going to eat that cost?

If the buyer cannot get a prime mortgage because of lack of income, there is always subprime mortgage available from secondary lenders :lol: That buyer can try to get a high interest loan to complete the transaction, instead of penalizing the seller, the original poster.

[Evil Baby]

Unless someone has really really wronged you or your family or has done something that must be brought to justice in order to keep them from re-offending or ripping other people off, is it really worth it to sue for $ or threaten people over a couple thousand dollars?

Like MoreMiles alluded to. There is much more at stake. Once the OP had a contract signed he/she stopped trying to sell their house. They took it off the market. Now they hae to incure cost of carrying that property, potential loss of money due to market conditions as well as other costs associated with the house(i.e. moving and such).

The entire point of the contract is to protect both parties involved. If one party breaks that contract they deserve to get their pants sued off.

The only logical advice here is to go to a lawyer. Depending on how the contract was worded the OP probably has an extreamly strong case.

[hagbard]

A deal is a deal, a contract is a contract. Never let someone off unless you're both happy with the change.

[Samwfive]

Yucky!

Related question...to avoid/lessen this from being repeated, can the seller ASK for more deposit from the buyer who HAS finally arranged the financing?

5g is kinda pitiful...I can't begin to imagine the legal fees....

[ShopSmart]

Like MoreMiles alluded to. There is much more at stake. Once the OP had a contract signed he/she stopped trying to sell their house. They took it off the market. Now they hae to incure cost of carrying that property, potential loss of money due to market conditions as well as other costs associated with the house(i.e. moving and such).

The entire point of the contract is to protect both parties involved. If one party breaks that contract they deserve to get their pants sued off.

The only logical advice here is to go to a lawyer. Depending on how the contract was worded the OP probably has an extreamly strong case.

The fact is that the market hasn't deteriorated yet in fact it's selling quite well so that part of the argument is out. I can understand the other points but my guess is that those would be minimal for a condo. In my opinion, it's not worth the hassle...some people would sue others for $500 if they thought they could make a case for it, some people are royally wronged for more legitimate reasons and they don't sue when they probably should. I guess it's a matter of choice.

[budfrogs]

A question out of curiosity. Since it is a condo and has fixed fees (condo fees) - can you claim those as loss because the buyer walked away from the deal?

[Evil Baby]

The fact is that the market hasn't deteriorated yet in fact it's selling quite well so that part of the argument is out. I can understand the other points but my guess is that those would be minimal for a condo. In my opinion, it's not worth the hassle...some people would sue others for $500 if they thought they could make a case for it, some people are royally wronged for more legitimate reasons and they don't sue when they probably should. I guess it's a matter of choice.

Then what's the point of a contract? Why bother even protecting yourself in the first place?

Depending on where the OP is moving to it can easily cost 20 grand to move. Perhaps OP is expecting the money from the close of his condo to pay for that moving company. The OP has every right to sue for more than $500, if not only to teach the other party a leasson. You don't go into a contract, especially one like this unless you fully expect to follow through with it.

[MoreMiles]

The fact is that the market hasn't deteriorated yet in fact it's selling quite well so that part of the argument is out. I can understand the other points but my guess is that those would be minimal for a condo. In my opinion, it's not worth the hassle...some people would sue others for $500 if they thought they could make a case for it, some people are royally wronged for more legitimate reasons and they don't sue when they probably should. I guess it's a matter of choice.

You got it wrong.

The choice was not made by the seller. It was already decided by the buyers when they chose to ignore the contract.

Right now, we are talking about the ramification of that "choice". It is a free world. The buyers made a choice, now they have to pay for it.

[JUnit]

Related question...to avoid/lessen this from being repeated, can the seller ASK for more deposit from the buyer who HAS finally arranged the financing?

5g is kinda pitiful...I can't begin to imagine the legal fees....


When negotiating the sale, the seller can ask for whatever terms and conditions he/she wants. For example, when I was selling my condo, I asked the buyers for an additional deposit payable when they waived their conditions.

I agree that $5k is a pretty small deposit considering the average price of houses. IMO, the deposit should be around 5-10% of the sale price, but that might be more than the buyer's down payment!

[ShopSmart]

You got it wrong.

The choice was not made by the seller. It was already decided by the buyers when they chose to ignore the contract.

Right now, we are talking about the ramification of that "choice". It is a free world. The buyers made a choice, now they have to pay for it.

What I meant is that it's a matter of choice whether ppl in this situation want to sue or not. You contradict yourself by saying it's a free world and then in the next sentence making the call that the buyer must be made to pay for it. Just because you would personally sue doesn't mean every single person in the same situation must act the same way you would and sue the person because otherwise they would be WRONG.