What is the name of your state (only U.S. law)? Texas
Hi, I just got news from my real estate agent that the seller wants to cancel contract based on a very vague excuse. The exact wording to my agent is quoted below:
"We have been informed by the Seller that this property will have to be re-foreclosed on to clear up issues, so they have no choice but to cancel the sale. As of right now, this is the only information we have been given. Please have your Buyer sign a termination of contract and release of em (returning it to the Buyer) so I can send them to the Seller for signature."
After the contract was signed, about 2 weeks ago, per contractual agreement, I paid for an inspection plus an appraisal totaling nearly $1,000 plus an additional $1,000 earnest fee. Not only that but I have to pull money from my IRA account to meet the loan obligations. After meeting all my financial requirements, I notified my apartment that I will vacate within 60 days per their requirement.
A little history about this home. It was on the market and was sold in the past but the original buyer's finance did not go through. Unfortunate for the seller, it was on the verge of foreclosure but as soon as the property was re-listed, I offered to buy it at the exact price but from what I was told it was too late because the foreclosure proceedings had began. From what I'm told, however, I'm not 100% sure, the previous owner was trying to make a quick sale but owed less than the sales amount. I thought I had to wait for foreclosure proceedings to begin before I can bid again but as luck may have it, the foreclosure party accepted my bid. I'm assuming this was to save them having to go through the delays and bidding process. Regardless, I was given until the 15th of June, 2011 to close and the only thing I'm waiting for is my check from my IRA account to show financial capability.
I was initially worried about my finance, therefore, I waited until everything was secured before I notified my apartment. All of a sudden, I'm getting this news and I searched this forum and the internet but couldn't find anyone with a similar situation, therefore, I'm hoping someone here can help. Many people advised to read the contract, for which I just did and found the following, that at the moment didn't look so bad until now. Please see below the statements I found from my contract:
Negative Sale Proceeds. If unforeseen judgments, liens, assessments, HOA assessments, or other such encumbrances result in negative sales proceeds to Seller, Seller reserves the right to terminate the Contract and this Addendum and return the Earnest Money to Buyer as Buyer's sole and exclusive remedy.
Understandable and acceptable.
But here's another clause:
"Default. In the event Buyer defaults in the performance of the Contract or this Addendum, the Earnest Money shall be paid to Seller as liquidated damages for, among other things, the additional cost of carrying the Property and lost marketing time, both of which Buyer and Seller acknowledge and agree are difficult to calculate. Said liquidated damages shall not be construed or deemed to constitute a penalty and the right given to Seller to retain the Earnest Money shall not constitute Seller's sole and exclusive remedy...."
If I'm not mistaken, this clause basically allows the Seller to pursue more than just the Earnest Money.
And here's the kicker, word for word from the contract:
"In the event Seller defaults in the performance of the Contract and this Addendum, Buyer shall be entitled to a return of the Earnest Money as Buyer's sole and exclusive remedy."
That's a double edge sword. This effectively means that, as a Buyer, you're entitled to lose everything while the Seller is entitled to lose nothing if they default.
While it is indeed on the contract, I question whether or not it is enforceable since it is grossly unfair. I had to initial this clause but didn't have to initial the other one, for obvious reasons. But for future guidance, if I didn't agree to the clause, will this affect my purchase?
BTW, I almost failed to mention, I believe they're trying to cancel the contract because the appraisal of the home turned out to be much higher than the sales price, almost by $40K. Do I have any legal recourse if this is true? Can I force them to give me a detailed explanation for the cancellation or must I sue to get it?
Sorry for such a long posting but I figure we must know as much as we can to really be able to help.
AirtexWhat is the name of your state (only U.S. law)?