Hello Bigger pockets members. I have a contract issue that I could use some advice from some experienced investors or attorneys out there.
Synopsis: Seller and I signed a contract on July 3rd 2018. Closing date was supposed to be August 31. The loan is with the Veterans land board. In Texas, and they take a long time. The property finally got approved by the VLB on August 30. Problem is the Contract expired August 31. I sent an amendment to the seller August 30, to extend the closing date another two weeks which is what the VLB needs. The seller did not sign the amendment. In fact the seller texted me on at least two different occasions that he was feeling very impatient and that he had two other cash offers waiting in the wings. Normally I wouldn't believe this stuff but in this case I think it might be true because I got such a good buy on the property. So I'm thinking he's going to claim the contract date of August 31, as the end of the contract and go on to his cash buyers.
I really want the property and the protracted time is through no fault of my own. Here we are down to the final two weeks, I am approved and the property is approved and the seller wants to back out.
So I started combing through the contract. As I combed through the contract I noticed on paragraph 22 that it states that "This contract contains the entire agreement of the parties and cannot be changed except by their written agreement."
Three days after we signed the contract the title company told us we needed to sign an HOA addendum.
We both signed it without a proper TREC approved amendment, and there's no date on the HOA addendum.
The issue I have is in paragraph 22 where it says "This is the entire agreement....". well it seems to me like it wasn't because 3 days after the contract date this addendum got added arbitrarily. Additionally the box for adding that addendum under paragraph 22 on the contract is not checked. I understand it was necessary for the seller to cover himself but still it's an arbitrary change to the contract.
I said all the above to say this: Since the seller arbitrarily changed the contract could he still insist on a contract termination date of August 31? Could I sue for specific performance? Or maybe threaten to sue for that or breach of contract, or something else? Or should I just go on to another deal?
Your not going to like this, but you have failed to live up to the terms of the contract and not the seller
The contract stated that you were to close by 8/31 and you were not able to do so. The VLB is not the sellers problem. The seller is free to terminate and accept another offer
The reality is they will probably have to use a different title company and therefore take 2 weeks to close. So, instead of threatening, I would approach the seller with additional non refundable earnest money if you fail to close again by 9/15. Make sure all of your ducks are in a row and that you can meet that deadline
Yep, the seller can simply walk away on the 31st.....You failed to perform, not the seller. The adding an hoa amendment does nothing to change this.
We were on the other side of one of these a couple weeks ago.
If you really want the deal and are confident that it will close.
I would suggest taking Brian's advise. I asked our buyer for 2,500 non refundable if he doesn't close in three weeks, he did that and we ammended the closing date.
If that doesn't work and you have a really sweet deal, you can also ask him how much extra he needs to stay in he deal. Maybe an extra 1,000 - 5,000 would keep him in he deal. You have to determine if it's worth that to you.
You have options but threating to sure him is not a viable one.
Seller is definatly in control. Based on todays date I would guess you already lost the deal.
I think its pretty funny the idea of you trying to sue or threatening to sue for specific performance when you are the one in default of the contract. That is a sure fire way to get yourself sued.
In NC, if you are getting a loan, the buyer automatically gets to extend closing 15 extra days past the original closing date if the delay is due to the lender/bank and not caused by the buyer. The seller has to honor this per the standard NC contract.
I was on the seller side of this last year and wrote about it. Should I die on a $120 hill?
Extensions are a pain and cost sellers money. They now have to make another payment, which in turn changes the payoff quote, which changes the loan amount, prorations, on and on.
That was my $120 issue and it was only a 3 day extension, at the end of the month, like yours. I refused to sign an extension unless it came out of the apathetic lenders and buyers agents pay. Apathy and red tape cost everybody.
Offer compensation to extend. If 3days was costing me $120, 2 weeks would be $560. It's your fault you chose or had to use VA. If it were me, I don't think I'd sign either. Then again, I don't accept VA or FHA loans period, so we wouldn't be having this issue at all.
@Aaron Smith If this clause was in the OP’s contract, we wouldn’t be having this discussion.
I have been on both sides of this issue. As a buyer, my lender flaked out 2 weeks before the closing date so I scrambled to find another lender. I notified the seller immediately and asked for an extension. He wanted $800 just to extend even one day. I said fine and went to another lender and told them about it and we actually closed one day early.
As a seller, I was dealing with a crooked, incompetent mortgage broker. I ended up extending twice. I did not extend a third time. The lender and buyer were extremely angry, but they held the property hostage for almost 2 months. I got an offer within days of relisting and we closed 3 weeks later with a real lender. I literally had about 5 deals daisy chained to this sale so the first lender really caused me a lot of headaches. I still closed all of the other deals within the contract date. To save my reputation, I ended up taking a HML on one of my properties. And I must add that I did tell my sellers that their transaction was daisy chained to my other one when I signed the PA's. You just don't want to get the reputation that you can't close or can't close on time.
So I can advise you with a neutral attitude since I was on both sides.
MY ADVICE: Close on time or walk away and move on to the next deal. Losing a deal sucks, but do you really want to jeopardize your reputation by suing? Word gets around in small circles and a lot of people won't want to do business with a litigious or messy person. If you really want the deal, offer the seller more money and put up a larger NON-REFUNDABLE deposit. I really think there should be non-refundable deposits by the buyer and the lender. If either one flakes out, then there are penalties.
Thank you for all of your input and advice, especially yours Russel Brazil for pointing out my hypocrisy for even thinking about such a stupid thing as threatening to sue. I have a good reputation and I want to keep it. I failed to mention that whenever I sent the amendment to the seller I offered $500 extra nonrefundable option consideration on top of the purchase price for the two week extension and ANOTHER $500 option consideration for ANOTHER two weeks just in case the VLB needed just a little bit more time to get their act together. This particular contract has been a good learning experience for me. I now know what kind of verbiage to put in my special provisions clause in my next contract. Something like "Notwithstanding anything to the contrary, the contract will close whenever the Texas Veterans Land Board says they are ready to close. " LOL. Or could you guys give me a good legal phrase that allows the lender to pick the closing date? Thank you all very much for all your replies.
There is no special phrase for a buyer to let the lender pick the day that works best for them. A good lender strives to meet the contractually obligates date agreed to between the buyer and seller
$500 would not be enough to get my attention as I have holding costs etc that are still accruing. $2500 non refundable might get my attention
While you are a buyer today, this also means you are going to be a seller as well one day. No doubt you are not going to want an open ended closing date right? You want your money to move on to the next deal
Hindsight and all that, but when dealing with picky governement agencies known for slow walking, adjust expectations up front and sweeten the option fee to compensate.
Here, try doing the same but $500 + $500 not likely. You have 2 prior months to make up for. What is it costing the seller? That is your offer.
$5,000 is what I paid when the lender cancelled at the last minute and I couldn't close, plus doubled my escrow. Scrambled, wound up with three loan proposals, took the best and closed 2 weeks later. If you try to purchase with the same lender again, protect yourself by negotiating a long closing date. Or at least insert a clause in the contract giving you the right to postpone closing for two weeks if lender takes longer than expected.
What you have here is your tuition in the school of hard knocks.