Termination fee during due diligence period
Need help/advice.
Our offer was accepted and we are currently on due diligence period. We completed the property inspection last week and knows that they did not have permit extending their basement and lots of electrical issues. All this was not disclosed on property disclosure statement. We paid top dollars for this property (way more the listing price) since we really love it. Once we found out about permit issue, we decided to terminate the agreement due to material information was omitted which if we knew it, we will not even submit an offer. We do not want to pay $5000 termination fee because this is material fact. We submitted the notice of termination but they did not want to sign in without termination fee (FYI, they were using "basement extended in 2021" as a selling point). They stated what they did to the basement did not required permit. We asked the proof but they can't provide it and put it on us to provide a proof that it requires permit. Which is completely ridiculous that buyer need prove that when they are the one using it as selling point. Now, the due diligence period will be over on 05/24 and they still refusing to sign. Do anyone here ever have this same issue? What did you do?
#3 1031 Exchanges Contributor
- Investor
- Las Vegas, NV
Are you sue a permit was required? (Did someone tell you it was required?) if so have them “prove a permit is required” by whatever proof they used to tell you that it was required. If nobody told you it was required why do you think it’s required? I assume your local building permit department could tell you in 30 seconds if one was required. There’s your proof.
Ps. Just as you can’t get your $5,000 back without their signature, USUALLY they can’t take your $5,000 without your signature. And they can’t sell to anyone else until your deal is cancelled (and you would get your $5,000 back.)
So…Make sure a permit is required. If so prove it then move on to getting your money back.
Ps. They probably also have an “after the fact permit” you could get for some amount of dollars. If you truly want this property, and aren’t just looking for a way out, then less than a $1,000 might make everyone happy.
I would talk to your REALTOR (c) about these things. Is the 5k escrows funds? What this will come down to is the instructions the holder of the escrow funds was given for dispersing the funds. If you signed a contract with a 5k termination fee, it will probably cost you more than 5k in legal fee's to prove that they were fraudulent and get your money back.
I am not a lawyer and this is not legal advice, but it would seem as though the burden of proof would be on you to prove that they fraudulently did not disclose the issues you think should have been disclosed. This will be very difficult to prove.
