Seller cancel and keep earnest money

[duggahead]

What is the name of your state?CA

Is an expired contract still enforceable? If not than do we have a chance of retaining the earnest money?

Residential Purchase Agreement states:

Close of Escrow shall occur 30 days after acceptance (closing date 09/28/05)

Finance Terms obtaining a loan is a contingency. Buyer shall act diligently and in good faith to obtain designated loans.

We have buyer that is represented by our agent but used their own mortgage broker. The mortgage broker was to originally have docs ready by October 4th. After a meeting between the agent and the broker on October 10th the docs became ready on October 12th, signed and delivered to Escrow by the 14th. Beginning October 12th the buyer stopped speaking with the agent, it seems the mortgage broker is advising the buyer and they have been extremely slow at fulfilling conditions. The buyer finally submitted closing funds on October 18th. A final walkthrough is scheduled for tomorrow at which we are asking the buyer to sign off on a no contingency agreement. If they don't sign we are submitting a buyer to perform then a cancellation letter.

So, if there has been no extensions requested or signed and there are funds in an escrow account, can we take them to arbitration or small claims to recover the earnest money? Our thoughts are that they have not "act diligently and in good faith to obtain designated loans". We have an attorney consult on Monday, but were interested in hearing from this community.

Thanks!

[torcal]

If your sales contract has a "liquidated damages" clause and the buyer does not perform, you get the money. However, the agreement should also contain a "time is of the essence clause". Otherwise a court may excuse the buyer's delay as "substantial performance".

Your real estate agent is responsisble for protecting you against such an eventuality and most standard form residential sale agreements provide for such. However, before handing this guy a termination letter, I'd first place a demand in escrow for the full amount of the liquidated damages before he has a chance to withdraw it.

Also demand a meeting with the agent's broker and ask him or her what they intend to do about their defaulting client. They are in a dual representation situation which is extremely dangerous for them from an ethics point of view.

You and can also check with the CA Department of Real Estate to see what they have to say.

[duggahead]

The contract is the typical California Association of Realtors (CAR) Form and we have both "Liquidation Damages" and "Time is of the Essence" clauses. Since it is probably unlikely they sign the demand of liquidated damages it looks like we are going for judicial decision or arbitration award. Is arbitration/mediation or small claims a lengthy process? I have read posts of people waiting years!

Also, is there any truth to seeking further damages if we end up cancelling and selling the home for less? I fully expect the "goodluck" response but thought to ask anyway

torcal, thanks for the advice! We intend on demanding a meeting with the broker, hopefully Monday morning from the lawyers office, and will definelty call CAR.

[HomeGuru]

Originally Posted by duggahead

What is the name of your state?CA

Is an expired contract still enforceable? If not than do we have a chance of retaining the earnest money?

Residential Purchase Agreement states:

Close of Escrow shall occur 30 days after acceptance (closing date 09/28/05)

Finance Terms obtaining a loan is a contingency. Buyer shall act diligently and in good faith to obtain designated loans.

We have buyer that is represented by our agent but used their own mortgage broker. The mortgage broker was to originally have docs ready by October 4th. After a meeting between the agent and the broker on October 10th the docs became ready on October 12th, signed and delivered to Escrow by the 14th. Beginning October 12th the buyer stopped speaking with the agent, it seems the mortgage broker is advising the buyer and they have been extremely slow at fulfilling conditions. The buyer finally submitted closing funds on October 18th. A final walkthrough is scheduled for tomorrow at which we are asking the buyer to sign off on a no contingency agreement. If they don't sign we are submitting a buyer to perform then a cancellation letter.

So, if there has been no extensions requested or signed and there are funds in an escrow account, can we take them to arbitration or small claims to recover the earnest money? Our thoughts are that they have not "act diligently and in good faith to obtain designated loans". We have an attorney consult on Monday, but were interested in hearing from this community.

Thanks!

**A: whomever wrote the financing terms needs to go to real estate school.

[torcal]

My point about notifying the escrow of your demand for the release of funds is just to put the matter in dispute with the escrow so that they will do nothing - even if your name if forged on a release.

The meeting tomorrow will be "unhelpful" (as our Secy of Defense would say) because everyone there has a stake in finger pointing, raising baseless issues and showing off.

THE ONLY REASON FOR THE MEETING IS A FORUM FOR YOU TO ANNOUNCE TO ALL PRESENT THAT THE CONTRACT HAS NOW EXPIRED DUE TO THE FAILURE OF A MATERIAL CONDITION; i.e., THE LOAN CONTINGENCY AND MAYBE SOMETHING ELSE. PERIOD..

THEN INSTRUCT BOTH BROKERS THAT YOU HEREWITH TERMINATE THEIR SERVICES AND INSTRUCT THEM, WITHOUT EQUIVOCATION, TO REMOVE YOUR PROPERTY FROM THE MULTIPLE LISTING SERVICE.

It appears that the agents haven't earned anythig since they have not provided a ready, willing and able buyer. If they gripe that they have a listing for a certain period of time, tell them you will sell it yourself. All standard forms contain that exception. If they still gripe, tell them to increase the price by $100,000 until their listing expires. And, of course, announce that you will obtain an ethics opinion from the DRE.

With respect to the "buyer", he can't sue you since he has not incurred any damages, such as selling his house. Even if he has, he can only get some money damages. It is almost impossible to get a court to force a seller to sell real estate unless it is so unique that no other piece of real estate in the area could be had for a comparable price. San Simeon and Windsor Castle fit that criterion but I can think of little else.

Just tell them that it's over - finis. You won't deal with the buyer anymore. And you won't deal with them if they don't shut up.

[torcal]

I just have one last comment.

Since your agent also represents the buyer, tell her/him to get the buyer's signature to release funds from escrow or to personally indemnify the escrow against a suit by the buyer to induce it to release the money to you. He/she can sue the buyer to get the money back.

The agent is not responsible for the buyer's failure to get loan approval, but I am sure you did rely on her good faith representation (express or implied) that the buyer would pay you money if he elected not to perform a condition of the deal.

It's a long shot, but in the area of dual representation the agent has taken on a fiduciary obligation to you and him. The agent should show you a long record of phone calls, e-mails and other attempts to contact the buyer to inform him of his liability to you. It's her obligation to protect his interests as well as yours. If she can't show a laundry list of contact attempts, it might be held that she breached her duty to you and owes you the money.

Anyway, stay on the offensive. If the meeting lasts longer than 30 minutes, just tell them you've delivered your one message, so go fix it or get sued.

[pojo2]

Originally Posted by torcal

With respect to the "buyer", he can't sue you

Yes, he or she CAN sue you.

[HomeGuru]

Originally Posted by torcal

My point about notifying the escrow of your demand for the release of funds is just to put the matter in dispute with the escrow so that they will do nothing - even if your name if forged on a release.

The meeting tomorrow will be "unhelpful" (as our Secy of Defense would say) because everyone there has a stake in finger pointing, raising baseless issues and showing off.

THE ONLY REASON FOR THE MEETING IS A FORUM FOR YOU TO ANNOUNCE TO ALL PRESENT THAT THE CONTRACT HAS NOW EXPIRED DUE TO THE FAILURE OF A MATERIAL CONDITION; i.e., THE LOAN CONTINGENCY AND MAYBE SOMETHING ELSE. PERIOD..

THEN INSTRUCT BOTH BROKERS THAT YOU HEREWITH TERMINATE THEIR SERVICES AND INSTRUCT THEM, WITHOUT EQUIVOCATION, TO REMOVE YOUR PROPERTY FROM THE MULTIPLE LISTING SERVICE.

It appears that the agents haven't earned anythig since they have not provided a ready, willing and able buyer. If they gripe that they have a listing for a certain period of time, tell them you will sell it yourself. All standard forms contain that exception. If they still gripe, tell them to increase the price by $100,000 until their listing expires. And, of course, announce that you will obtain an ethics opinion from the DRE.

With respect to the "buyer", he can't sue you since he has not incurred any damages, such as selling his house. Even if he has, he can only get some money damages. It is almost impossible to get a court to force a seller to sell real estate unless it is so unique that no other piece of real estate in the area could be had for a comparable price. San Simeon and Windsor Castle fit that criterion but I can think of little else.

Just tell them that it's over - finis. You won't deal with the buyer anymore. And you won't deal with them if they don't shut up.

**A: are you sure?

[pojo2]

Oh I just really noticed this little statement

It is almost impossible to get a court to force a seller to sell real estate unless it is so unique that no other piece of real estate in the area could be had for a comparable price. San Simeon and Windsor Castle fit that criterion but I can think of little else.

Wanna' splain this statement and where you harvested this little tidbit of information?

[torcal]

The contract expired by it's terms on 9/28. Unless you did or said something to extend it, the whole deal is over. Your agent cannot act on your behalf in extending the contract without your knowledge and prior written consent.

Sue him, but remember that the jurisdictional maximum of a small claims court is, as I recall, only $5K. If you sue in that forum you lose your rights to claim any excess in a Superior Court action.

[duggahead]

Update:

Buyer signed release of all contingencies. The attorney called the mortgage broker who stated it would fund by 3:30pm. As of 4pm escrow has heard from no one and said none of the conditions have been sent to the funding agent at the bank!

I personally call the broker; he says the problem has always been the value of the property. He had multiple assessments that delayed everything by 2 weeks. That was the first time I heard of that. Markets are changing the banks are looking for reason not to fund. Basically the guy is feeding me a bunch of...well...nothing.

My question:
When does trying to shove a square peg in a round hole become fraudulent? Attorney says until he communicates directly with me that all the emails, message logs and conversations mean nothing. I have a hunch that buyer got the original approval on stated income, then somewhere along the line had to go full documented and over the past few weeks can't provide the appropriate documentation.

The two reasons for holding on:
1. Just FUND
2. Build a complaint to take to the Department of Corporations

[torcal]

So, the buyer waived all contingencies. Big deal. He can't waive the clause in the contract that says the deal must close by 9/28. Your lawyer talking to the buyer's mortgage broker is useless.

Convey to the buyer the fact that the deal is off and make a demand for the liquidated damages (with a copy to the escrow). If the contract requires arbitration, then so be it. It's cheaper and the buyer probably has to pay your legal fees when he loses. Read the contract carefully and follow all the required notice provisions for arbitration.

You should know that arbitration is legally binding. You can't appeal and the decision of the arbitrator is final. Mediation is a formal attempt to reach a settlement and the judgement of the mediator is not binding. If he finds for the buyer you can still sue - and so can the buyer. However, you are both out the cost of mediation.

If you still want to go through a deal with this guy, make him sign off that the old deal is dead. Then make him prove he has the money to close the deal - such as an unconditional commitment from a bank or, better yet, a letter of credit. Enter into a new contract, make the liquidated damages larger, and write into the escrow instructions that there are zero contingencies and that if the deal does not close by X date then the buyer authorizes the escrow to pay the liquidated damages to you without further approval of the buyer. Have the escrow approve this arrangement before hand so there will be no arguments.