Buyer doesn't show up to closing

44 Replies

Hello,


I had a retail buyer put in a cash offer on my flip for sale.  Went through inspections with no issues.  Day of closing, I showed up and signed all my papers, buyer's were scheduled for 1.5 hours later but never showed up.  Their realtor called them a few days later and she said she was out of town because her mom was sick and she still wanted the house.  Another week passes and still has not closed. She says she still wants the house.   2 weeks have passed and she has completely cut off contact and has not responded to the realtor.  I can't even get the earnest money as they can not get ahold of her to sign the release.

Realtor says I should get a lawyer and go for damages, I don't know if anything would happen as they can't find her.  Any thoughts?

Thanks

Hi @Adriel Hsu . Sounds like you got a raw deal here.

If this buyer were an investor, I might pursue legal action, but probably not: It's a costly distraction that won't get you your time back. Since they are just a "civilian," I'd definitely just move on.

That said, I totally don't understand the issue with getting you the earnest money. I'm assuming the buyer paid EM funds directly to your agent, and the contract was clear on what would happen if the buyer didn't close in the specified time. If so, why does the buyer need to sign any release? Your agent has the money and should release it to you.

What am I missing here?

I think you should put the house back on the market asap. Although you won't be able to access the escrow funds unless she signs a release, the same goes for her. She will come around eventually since it's her money in there, and you can deal with it then.

Anyone who recommends you getting a lawyer and suing someone has probably never sued someone. It's expensive, time consuming, and stressful. 

@Mitch Messer .  In my experience, many escrow agents (but not all), try to get both the Seller and the Buyer to sign off to cover themselves in case of a dispute. Also, if the Buyer were to simply send an email to the escrow agent claiming there is a problem, almost all escrow agents are going to throw up their hands and tell the parties to work things out before they release even 1 cent of that money.

I've seen this happen with large amounts of escrow money and also with small amounts.

I've seen several EMD disputes for various reasons over the years.. That money will sit at title forever and get bled away by fees until both parties agree on something

@Adriel Hsu Definitely re-list the property, but before you do, let the title company know you expect the earnest money to be released to you and ask that they do whatever they need to do in order to make that happen. Getting the borrower to sign a EMD release is the easiest way for the title company to release the money, but certainly not the only way.

@Adriel Hsu Have an attorney draft a letter to the buyer's attorney, or buyer if they didn't have one, and declare breach of contract. At that point I remind them we can pursue damages but we will waive that right if the buyer signs a release of earnest money to seller.

OK, crazy thought, but is it possible the buyer has died or become incapacitated?Have you tried stalking social media sites under their name to see if they are alive and well?

Originally posted by @Mitch Messer :

Hi @Adriel Hsu . Sounds like you got a raw deal here.

If this buyer were an investor, I might pursue legal action, but probably not: It's a costly distraction that won't get you your time back. Since they are just a "civilian," I'd definitely just move on.

That said, I totally don't understand the issue with getting you the earnest money. I'm assuming the buyer paid EM funds directly to your agent, and the contract was clear on what would happen if the buyer didn't close in the specified time. If so, why does the buyer need to sign any release? Your agent has the money and should release it to you.

What am I missing here?

As someone who just went through a dispute over EMD, even being 100% in the "right", if the "wrong" party wants to fight it, no one simply cuts a check. The holder of the EMD will let it sit until it is resolved.

Personally I would send direction to the seller to release the EMD and go from there. I assume TX is not an attorney state? If it was I would say speak to your lawyer.

You dont have damages until you sell the property. When you do the delta between the current contract price and eventual sales price is your damages.

@Adriel Hsu

Just had this happen in October.  Buyer is ready, mortgage approved, inspection completed, repairs made as agreed upon and buyer backs out.

We did not take the earnest money back or release them from the contract and will be filing court action against them.  As of today, our attorney has sent them a demand letter.

We since sold the property and are damages are about 12K.

Serve a non-performance after expiration, put it back on the market. Keep the deposit as local law permits.

For the same reason I ask >3% for EMD.


@Adriel Hsu Don’t know the specifics of your state but you will need a release to get the EMD. More importantly you may have trouble clearing the title without a proper release signed by seller. I would press for the EMD but if they fight it then give it to them just to get the release. This could get messy very quickly. Good Luck!
@Adriel Hsu It’s pretty easy here in AZ. Title releases EM at their discretion. And sue for failure to perform to get the deal done or move on to a new one. Silly how some states complicate it like that.

I do not know about Texas, but in some states you need to send a form from your realtor to their realtor demanding performance on the contract then if they do not preform you can cancel the contract for nonperformance and have a clear path to sell the house with out her being able to make a claim against the title.  Might be important in case she tries to withhold the deposit by threatening that the contract was not cancelled correctly. 

Originally posted by @Adriel Hsu :

Hello,


I had a retail buyer put in a cash offer on my flip for sale.  Went through inspections with no issues.  Day of closing, I showed up and signed all my papers, buyer's were scheduled for 1.5 hours later but never showed up.  Their realtor called them a few days later and she said she was out of town because her mom was sick and she still wanted the house.  Another week passes and still has not closed. She says she still wants the house.   2 weeks have passed and she has completely cut off contact and has not responded to the realtor.  I can't even get the earnest money as they can not get ahold of her to sign the release.

Realtor says I should get a lawyer and go for damages, I don't know if anything would happen as they can't find her.  Any thoughts?

Thanks

 Odds are that if she truly was a cash buyer, she was making offers on more than just your property and actually went with one of the others. I've had it happen. Texas is pretty good about privacy so I don't know if you will be able to find out, but most counties allow you to search for new Warrant Deeds by last name. It won't get you your money back, but it might explain what happened and give you a new address to send a collection letter to.  

Originally posted by @Mitch Messer :

Hi @Adriel Hsu . Sounds like you got a raw deal here.

If this buyer were an investor, I might pursue legal action, but probably not: It's a costly distraction that won't get you your time back. Since they are just a "civilian," I'd definitely just move on.

That said, I totally don't understand the issue with getting you the earnest money. I'm assuming the buyer paid EM funds directly to your agent, and the contract was clear on what would happen if the buyer didn't close in the specified time. If so, why does the buyer need to sign any release? Your agent has the money and should release it to you.

What am I missing here?

what your missing is that in many markets the agents don't hold the EM the title company or closing attornies do.. and they wont release the EM unless both parties sign..  that's whats happening here.. in some states agents routinely hold EM  and then keep it as a credit towards their commissions.. but they too are not suppose to release it without both signatures.. ( at least I believe that to be the case).

@Jay Hinrichs @Brian Pulaski @Stanley Bronstein

Ah, I understand now. Thank you all for clarifying.

I can see how, if the EM were to enter escrow, it would be necessary for both buyer and seller to sign off on release.

Here in Georgia, it's been my experience that the listing agent will typically demand to hold EM. So, these funds never actually enter escrow. At the time of closing, the closing attorney will just credit the EM toward the listing agent's commission.

So here, in the event of a dispute like OP mentioned, only the listing agent and their broker would need to be petitioned/persuaded.

@Mitch Messer in my state of the buyer doesn't sign the release, then a claim has to be filed. The title agent won't just release the money until a determination is made as to who has the right to the funds, no matter how clear it is. It's much easier to get a release signed.
Originally posted by @Mitch Messer :

@Jay Hinrichs @Brian Pulaski @Stanley Bronstein

Ah, I understand now. Thank you all for clarifying.

I can see how, if the EM were to enter escrow, it would be necessary for both buyer and seller to sign off on release.

Here in Georgia, it's been my experience that the listing agent will typically demand to hold EM. So, these funds never actually enter escrow. At the time of closing, the closing attorney will just credit the EM toward the listing agent's commission.

So here, in the event of a dispute like OP mentioned, only the listing agent and their broker would need to be petitioned/persuaded.

 Yup I see that often in other states..  although LAST thing I would want to do as a RE broker is have a trust account.. Trust account violations are easy to do and number 1 reason brokers loose their license.  And as a buyer no way I want my funds sitting with a Broker I want it with title co.. or closing attorney. 

@Adriel Hsu Here in MA, we typically get EMD with the accepted offer to open the due diligence period of 10 days. Following that, we get a second, larger deposit and sign the P&S.

Both deposits are at risk, should the buyer fail to perform to the contract.

Our standard P&S specifies that deposits are held in escrow (usually at the seller's brokerage) until both parties sign a release.

I just went to small claims court on this 2 weeks ago.  I represented the seller.  A buyer committed mortgage fraud in the loan application (falsified her income) and was eventually denied her loan.  She never informed us.  I found out on my own long after her mortgage contingency expired and put the home back on the market.

She sued my brokerage for refusal to release the deposit.  I asked the magistrate for a dismissal with prejudice, as she has sued the wrong party.  The magistrate agreed.

This is the clearest possible case of the buyer defaulting. Even though the P&S states that all deposits are due the seller in this case, we're reaching a settlement of a 50/50 split to avoid having to go back to court.

TLDR; Your P&S should specify what happens to deposits in the event of buyer default.

Originally posted by @Dan Maciejewski :
@Mitch Messer in my state of the buyer doesn't sign the release, then a claim has to be filed. The title agent won't just release the money until a determination is made as to who has the right to the funds, no matter how clear it is. It's much easier to get a release signed.

I had one in PA were the contract called for mandatory mediation.. so we did that. and like most of these deals we split the baby down the middle.. even though we were for sure due the whole 10k.. but usually as a seller I will offer to split it.. and that usually works.. 

out west as you say what happens here is if its not handled in a specific amount of time 6 months to a year.. the title / escrow company will interplead the funds to the court.. and then buyer and seller have to hire attorneys and argue in front of the judge.. so obviously no one win's in that scenario as most of the time cost of court and attorney is greater than the money being fought over.. that's why I like my win win.. just split it.. the one in PA those folks were kind of nuts and it was 10k.. so I get the mediation.  that cost a grand and my agent went for me ( not all agents will do this for a seller but we have ongoing business)  and mediation cost in that setting 1k fee.. so we got 4k and the buyer got 4k..  and of course a lot of emotion for the buyer.. they paid for home inspection and appraisals etc.. and day before closing got cold feet and wanted their EM back.. at that point I said no.. but that's how we resolved it.. plus I don't want them claiming my broker did something wrong.. and put them through that either..  

Originally posted by @Charlie MacPherson :

@Adriel Hsu Here in MA, we typically get EMD with the accepted offer to open the due diligence period of 10 days. Following that, we get a second, larger deposit and sign the P&S.

Both deposits are at risk, should the buyer fail to perform to the contract.

Our standard P&S specifies that deposits are held in escrow (usually at the seller's brokerage) until both parties sign a release.

I just went to small claims court on this 2 weeks ago.  I represented the seller.  A buyer committed mortgage fraud in the loan application (falsified her income) and was eventually denied her loan.  She never informed us.  I found out on my own long after her mortgage contingency expired and put the home back on the market.

She sued my brokerage for refusal to release the deposit.  I asked the magistrate for a dismissal with prejudice, as she has sued the wrong party.  The magistrate agreed.

This is the clearest possible case of the buyer defaulting. Even though the P&S states that all deposits are due the seller in this case, we're reaching a settlement of a 50/50 split to avoid having to go back to court.

TLDR; Your P&S should specify what happens to deposits in the event of buyer default.

 its common in Texas to put up 100.00 option money during the due diligence and if you bail during your inspections the 100 is lost. that is very common in that state. then you put up your bigger amount.. but we are in contract.. 

@Jay Hinrichs MA is a very funny state!

We are a 2-contract state. First, a written offer. After due diligence, a signed P&S.

Technically, we could close from the offer, but we just don't.

Also, we're an attorney state.  We don't use title companies. 

Originally posted by @Bob Floss II :

@Adriel Hsu Have an attorney draft a letter to the buyer's attorney, or buyer if they didn't have one, and declare breach of contract. At that point I remind them we can pursue damages but we will waive that right if the buyer signs a release of earnest money to seller.

I agree with this. I've been through this before and have learned the hard way that EM is a joke. I've never seen it go to the seller even when entitled to it legally. I don't even consider EM when I sell a house anymore. If people are really serious, waive all of your contingencies instead.

By the way, what nationality was this buyer OP? I went through this a few months ago and the attorney I spoke with said they had a dozen similar cases all with Chinese buyers as the culprits in just that week....My guy was also Chinese. Not only that, he turned out to be a deca millionaire founder of a tech company you've heard of. Yet he claimed he didn't have the money to get financing all of a sudden after tying my house up for 3 weeks. His wife is also a VP at PayPal....if you're reading this Andrew...

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