Seller Trying To Back Out, Now What?

Submitted offer with earnest deposit. Cash deal. Offer accepted. Signed Purchase Agreement with no contingencies on either part, other then inspection for which I have 21 days. Seller now trying to stop deal...says the person he was buying from on other end (new home) has increased price therefore he may not be able to follow through. Sounded real wishy washy.

My feeling is he now knows I bought home for about $15,000 under appraisal as I bought about a day after FSBO sign goes up.

Do I have any recourse?

Erik

Comments(29)

  • smithj217th February, 2004

    Let me preface this with the statement that I am not an experienced investor. I am just starting out and my answers will be based only on my personal (and admittedly limited) pool of knowledge.

    I have read that if it is a liquidated damages contract, the seller can back out as long as they are willing to reimburse you for any out-of-pocket expenses that you might have incurred. They will definitely have to give you back your earnest money and maybe the inspection fee if you have already had an inspection done.

    I don't see how you can "force" the seller to sell you the house. Maybe there are others out there who have a different opinion. My advise would be to sit down with the seller and see if you can identify what their need(s) are. It might be worthwhile offering them an extra $1000 at closing out of your pocket just to keep the deal alive.

    Let them know that a bird in hand is much better than two in the bush. They might believe they'll get a higher price, but do they really want to go through all the hassle of dealing with potential buyers when they have you (Big Smile on your face) all ready to go.

    Just my two cents. Good Luck.

    JS.

  • tanya121517th February, 2004

    Did you put your earnest money deposit in escrow? If so, then did you require the seller to also put deposit money in escrow? Usually the buyers and sellers put the same amount of deposit money in escrow. Depending on what your contract states concerning the earnest money deposit, you may be able to claim all the money in escrow if the seller backs out. So, if both parties put in $1000, then the party that backs out loses the $1000.

    Now, if you gave your seller the earnest money deposit to hold onto, then you can kiss it goodbye. You will most likely not see it again. You need to read what your contract says about earnest money deposits and if it states anything about a party's failure to follow through on the transaction.

    Tanya

  • InActive_Account17th February, 2004

    My P&S states:

    Earnest money is to be deposited with licensed title company or attorney within 48 hours of acceptance by seller.

    Under default: If seller defaults, buyer may pursue all remedies allowed by law and seller agrees to be responsible for all costs incurred by buyer as a result of sellers default.


    Sidenote: I just spoke to a buddy of mine who is a realtor. He says I can sue for the difference for the contract (agreed upon price) price and the propertys current market value.

  • InActive_Account17th February, 2004

    Erik,Check with a RE Attorney on this issue. I do not know what your contract states about cancellation of this deal by either party. I know under UCC (uniform commercial code) the buyer can back out within 72 hours.

  • davehays17th February, 2004

    NO way,

    You go right down to country courthouse and tell them you want to file a memorandum of agreement, or an affidavit of equitable interest, whatever it is called in your area, and bring your purchase and sale agreement in case they need proof. This should cost low money, about $20 or so.

    This creates a cloud on the title. The seller is jerking you around. Sounds like a horrible attempt to compensate for their seller's remorse, but it doesn't matter - you have a signed agreement that is enforceable. They can't just get out because someone came down the block and told them they would give them $100 more.

    Don't listen to the newbie who says you can't make someone sell you their house. IF YOU HAVE A SIGNED AGREEMENT YOU CAN!

    Once your memo is filed, just stop. Eventually you will get a call from the seller's lawyer who will have spotted the cloud - guess who they have to come through to get title cleared, so a title company will issue a title policy, so a lender can originate a loan on that property? YOU! What you "charge" for them to make you whole is up to you, but I would definitely do it for the minimum profit I expected to make on this deal, but again that is up to you.

    This jerk will have no choice but to comply, or he won't be able to sell his property.

    Good luck, Dave

  • Stockpro9917th February, 2004

    Dave you took the workds right out of my mouth! Excellent post, clear, concise, and above all very useful!

    Randall

  • NancyChadwick17th February, 2004

    I would just add that while it may be true that you can "cloud" the title and/or seek specific performance, the other factor you should take into account is the cost of litigating. Ask your attorney to estimate your legal fees and court costs to force this seller to sell to you. That $10K can get eaten up very quickly. Then decide if you really want to go that route.

  • davehays17th February, 2004

    Nancy,

    what litigating does the person clouding the title have to do in this example? I would think the seller has to pay, Why the buyer?

    The sellers have to work the deal out with the buyer, and so they lose time and money, not the other way around.

    Have you heard of any specific examples to the contrary? Thanks, Dave

  • NancyChadwick17th February, 2004

    davehays,

    As a matter of fact, yes. At least in PA, just because someone files a lis pendens doesn't mean that the lis pendens stays on the property forever and ever. The matter gets into litigation by the record owner challenging the validity of the other person's claim to ownership right in the property. The record owner has every motivation to try to get the lis pendens stricken.

    Understand that I'm NOT saying there isn't a valid claim to ownership here. What I'm saying is that it might not be worth litigating the issue in order to force a seller to sell a property that's $15K under appraised value. $15K can be blown very quickly in attorney fees and court costs. If someone is going to litigate whatever, the "payoff" should be more than $15K.

    As I said in my prior post, the buyer should consult his real estate attorney to understand the upside and downside of litigating as opposed to getting back down money and moving on. Having seen more than my share of the legal system and litigation, long ago I came to the conclusion that litigation should be viewed as the absolute last resort. It eats up time, energy, effort and money.[ Edited by NancyChadwick on Date 02/17/2004 ]

  • bgrossnickle17th February, 2004

    First .... has anyone here ever recorded a memorandum of agreement or an affidavit of equitable interest.

    Second .... the gurus love to throw this stuff around, but I do not think many county recorders would record these made up documents. And I believe that they must be signed and notorized by the seller to even be considered for recording. Otherwise every weirdo who got made at their neighbor would be down at the county court house.

    Third ... the seller does not even own the property yet. Have you verified at county records who owns the property? You can not make a person sell a house that he does not own.

    Fourth .... getting tired of this numbering stuff .... at the court house find out who owns the property and call them to get to the bottom.

    Fifth .... finally .... you can bluff a law suit with the seller and try to scare him into keeping his end of the deal, if he is able. And you can even get an attorney to write a letter or make a phone call. But only the very wealthy sue for non-performance of a residential sales contract.

  • InActive_Account18th February, 2004

    I am consodering "clouding" the title with the P&S and a Notice of Interest" or whatever the right document may be to do this.

    Secondly, the people I have entered into this P&S with ARE if fact the recorded owners.

    You know, it's funny, becuase when my wife and I when through this process and bought the home, she felt uneasy because of the price "we felt" er were getting it for. But during our negotiations with the sellers, they mentioned they had the property on the market a year ago with a Realtor, which they had withdrawn for reasons that are not totally clear to me. But, intrestingly enough they told us the property was on at that time for $169, $179..somehwere in that range - as they explained it to myslef and my wife.

    However, after having my Realtor buddy pull the old listing, which the sellers thought I probably would never be able to have access to, the actual listing price was $159,000.

    So what's funny is my wife is now like ... frig them, they lied to us...we paid a fair and equitable price ....they're not going to get away with this.

    I definately believe that someone got into their ear after our deal was done, and smartened them up a bit as too what they should of been able to get or maybe they should not have accepted the first offer, etc.

    Also, during negotiations, the sellers said they didn't even need a contigency on their end because the home they were buying already had a closing date set and their financing was in place.

    Hey, I really appreciate all the insight and help from you all.

    Erik

  • davehays18th February, 2004

    Our pleasure Erik (I'm speaking for others, hope it is ok). We've all got differing opinions here, but that is what they are - of course seeing an attorney is the best way to go, and you can bring these ideas to the pros.

    Best, Dave

  • investinarizona18th February, 2004

    I agree with DaveHays, be aggresive not passive. Force the seller to ante up for his mistake, I believe it would be more a headache for the seller to litigate than for the buyer...the seller should want to pay some go away money real quick on this one.[ Edited by investinarizona on Date 02/18/2004 ]

  • bgrossnickle18th February, 2004

    Erikahlberg, please let me know how the recording of the "cloud" goes. I am in Seminole county also and Sanford is my farm.

    I will ask again .... has anyone here ever recorded a memorandum of agreement or an affidavit of equitable interest.

    If you have recorded one, did the seller have to be signed and notorized.

    Brenda

  • InActive_Account18th February, 2004

    Yes, it seems you have cause. You can cloud tiltle and you can sue for " specific performance".

    I've had a lot of sellers renege in my transactions. I generally get my money back and move on. I'm into real estate investing not litigation. Sueing is ttime consumming, emotionally demanding, and expensive. The attorney will probably take this on a hourly basis. Thatt's when you will learn that there are more than 24 hous in a day -according to his billings.

    I would prefer to negotiatie a fair settlement and get on with my life.

  • InActive_Account18th February, 2004

    Again, thanks all for your insight & advice.

    Brenda, if I cannot get anywhere with this seller by this coming Monday, I will go to the recorder of deeds in Sanford and attempt to cloud the title.

    The P&S I have is signed by myself, the husband and wife, but not notarized. Also, I have a sign "Offer" signed and accepted by both of them. Upon signing the Offer, we then drew up the P&S.

    I will let you all know how I make out.

    Erik

  • mccarthychas18th February, 2004

    Since land is unique and there isn't any more being made, you can force the sale if your documents are in order. It looks like your P&S says the Seller will pay for your lawyer too.

    If you really want this house then force the sale. If you are only interested in making a profit on a turn around, then settle for what you would have made on the deal.

    It's worth talking to a real estate attorney on this one. Most have free initial consultation.

    Good luck.
    -Chas

  • libertyproperty18th February, 2004

    I'm new to this board but not new to Real Estate.
    An unrebutted affidavit is the highest form of evidence in a court of law.

    Filing an affidavit stating the basic tems of the agreement will cloud the title. (You do not need any signature from the sellers, for those who would ask.)

    The sellers could file a "slander of title" action but probably won't because they'll lose and pay all the court costs for both sides.

    Cloud the title, make sure there is a addess and phone number on the filed document.

    Go to radio shack and get a gizmo to record a phone conversation. Send a copy of your filing to the sellers with the court clerks stamp on it. You have a fifty-fifty chance they are going to call you and in an "excited utterance" blab the whole deal to you again and admit while being recorded that they are reneging on the deal.

    For those that don't know what an "excited utterance" is, its when someone blabs out something stupid while disturbed about something. In this case something like "These new people are going to pay me more money, so I want you to tear up the contract we have."
    That would be a "Perry Mason" moment.

    You should get an offer in compromise from the sellers when they find out the title company won't issue insurance with the cloud.

    Another school of thought is don't expend a lot of energy on this. Take a deep breath, smile and say "NEXT!".
    (Find another deal, life is too short.)


    [ Edited by libertyproperty on Date 02/18/2004 ]

  • InActive_Account18th February, 2004

    Thanks Liberty... and Justice for all

    Gotta love it when us little guys are protected.

    Erik

  • mengberg18th February, 2004

    This original post was created quite a while ago but it doens't look like we have a final conclusion. Can you tell us what finally happened with this title? Did you walk away? Were you able to buy the property? Would love to know.

  • InActive_Account18th February, 2004

    "Only" because the seller's lied to me about their listing price a year ago when the property was on the market. Greatly over-exegerated! (said was on market for $179,000 when actually listed at $159,000)... Plus the guy was kinda a turd about pumping his house when I was viewing it. Putting all other houses down in the area and his was the greatest, yadda, yadda!

    If the seller's do not come back down to earth in the next day or two and someone does not "enlighten" him with the possible recourse I have against them and ultimately proceed forward with the sale to me.

    I am planning on sending them a letter and telling them I want the difference between the purchase price and the properties current market value (+-$15,000).

    If they do not agree to that, then I will follow through on...

    1) clouding the tile with a "lis pendens" utilizing a Notice of Interest & the Purchase Agreement.

    2) Force the sale of the property to me (through court litigation) for under my rights of specific "specific performance".
    (In the P&S we signed it states the seller "agrees to all costs incurred by buyer as a result of their default".

    From everyone I have consulted with and the DD I have done, it's seems as though I have a very ggod position.

    I will be sure to let you all know how it turns out. I greatly appreciate all the help and encouragement I have received here.

    My gut tells me this: Basically someone said to them - you knuckleheads sold for what? and accepted the first offer. jeeeesh (actually my 1st offer was $147,000 hehe) - Once they realize what they are in for legally and see that they really have no grounds to stand on, they will follow through with the sale.

    Erik

  • libertyproperty19th February, 2004

    You need to cloud title BEFORE you talk to them or they can send their buddy down to the courthouse with a purchase agreement that would possibly (arguably) be superior to your claim on the property.
    Here is an on point article by member John Merchant. I've taken off the http://www in the hopes this internal link will be preserved. (I'm brand new and not entitled to give outside website links.) Mr Merchant makes some valid points. If you do this right, you don't have to force anything. They will have to pay you some money to have you go away.

    (P.S. You could always quitclaim to another entity you control, that'll lock-down the title insurance guys.)

    http://www.thecreativeinvestor.com/modules.php?name=News&file=article&sid=321[ Edited by libertyproperty on Date 02/19/2004 ]

  • tanya121519th February, 2004

    In Florida, it's a memorandum of agreement.

  • mcl819019th February, 2004

    Please do not take Liberty's suggestion about buying a recorder and taping the conversation. Many states have VERY strict laws when it comes to wiretapping and recording a conversation.

    Not only will your tape be thrown out of court, you could be looking at jail time.

    Look at the Linda Tripp case with taping Monica Lewinski

  • saniche19th February, 2004

    I have recorded one and no it does not have to be notarized by the seller. Additionally I had zero resistance from the flirtatious woman at the recorders office

  • InActive_Account19th February, 2004

    It's done.

    Rather then wait for the possibility of the Seller to back date a Purchase Agreement to a friend or family member and run to the Courthouse to have a higher priority position then me...

    I took a "Memorandum of Agreement" (which had to be notarized) & the "Purchase Agreement" (a copy, not the original & it was NOT notarized) and recorded them. (4 pages total), I was required to record the P&S as the MoA made reference to it.

    The total cost (which included a certified copy which was given to back to me and stamped with the seal of the Clerk of Court) was $24.50

    Faily simple. Took all of 5 minutes.

    Erik

  • davehays19th February, 2004

    AWESOME NEWS!

  • davehays19th February, 2004

    yes, do NOT record their conversation, it is inadmissible, because you did not get verbal permission from them to record the conversation, and you just do not need to do that anyways.

    You filed the doc, now get onto another deal, and be sure to call back the sellers attorney when he sees that cloud, and has to come through YOU to clear it!

    Best, Dave

  • libertyproperty20th February, 2004

    It IS legal in all but two or three states to record conversations as long as one party to it agrees to the recording.

    One must be state specific when saying something is illegal. Those who would argue that having to much evidence to prove your case in a civil matter have NOT been in a civil case.

    The plaintiff has the overwhelming burden to prove their case in a civil matter. They need to be able to HAMMER their case home, otherwise you'll get into motions, reply to motions. Motions to strike motion. Motion to strike the motion to strike the motion...

    In Arizona it is legal to record a telephonic communication (as it is in most states.)

    A recorded conversation may allow for a quick settlemnt.

    There is an old joke, concerning a cheating husband caught in an act of infidelity. The jokes punchline is:
    "Who you gonna believe me or your lying eyes?!"

    If you filed an action against these people, they would start yelling FRAUD. "He tricked me!". They will say they arranged to sell the property to an HONEST person after finding out that they were duped by you.

    Not true. Prove it.

    They will not say they wanted to cheat you because they could get more money elsewhere.

    Of course, at the right moment, if you could produce evidence (from their own mouth) that shows they were offered more money elsewhere and because of that, and that reason only, they want to back out of your deal...

    The litigation may become short and sweet with damning evidence from their own mouth.

    99% of the time, if you sue someone they will yell FRAUD. Their story will change and will be sworn to under oath.

    Litigation is not for the weak. If you think all you have to do is show up with a document at the courthouse and that will prove your case. Well... Then you've never been the subject of a deposition.

    Sample questions:
    Q. Mr. Smith, do you commonly send letters to people in foreclosure and offer to "Help" them?

    A. Yes

    Q. Mr. Smith, do you feel these people are vulnerable and were what you would call "motivated sellers"?

    The follow up questions after this would be in the nature of:

    "You say you don't think the defendants are vulnerable, why not?"
    "Didn't you preceive them as being under pressure to sell?"
    "Tell us about your business, do you target vulnerable people?"
    "What is your definition of a motivated seller?"
    "so you look for people under financial pressure to "help"?
    "Do you feel talking someone out of their home equity is an honorable way to make a living?"

    A "good" lawyer could have made Mother Theresa look like she was in it for the money.

    "A lawyer is a man who does not have the character to put on a mask, grab a gun and rob a bank. At least the bank robber is straight forward about what he's up to."
    Unkown



    Record, don't record, it means nothing to me. I happen to have the ability to LEGALLY record any business phone conversation at a moments notice. Someone sues me over a deal, we may be discussing "the" phone conversation, "line by line" at a deposition.

    This is my two cents worth. Accept it or reject it. AFTER your first lawsuit you'll understand.
    PEACE

    [ Edited by libertyproperty on Date 02/20/2004 ]

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