Walking away from a deal, can i get my money back?

Question

I am not a super novice investory but I am far from super experienced either as the below post will indicate. So far the deals I have done have been relaively smooth wiht some minor hiccups. However most recently I put an offer in on a property and signed an AOS with settlment approaching. The Agreement of Sale represents that the property is a Multi Family Residential. However I find out when I try to get insurance that it is Commercial Mixed Use that requires it to be an owner occupant on one floor with the rest of the building commercial. ANS the insurance on such property is more expensive. Shame on me for not knowing this in advance since the property was being rented and used as a multi family when I saw it.

Secondly I come to fine that the property is ALSO in a Historical Overlay which requires me to go through extra hoops if I want to do ANY renovations. With all this being said do I have a right to get my earnest deposit back? if I take that the seller mispresnted the zoning and use? Property is in New Jersey.

Secondly I come to fine that the property is ALSO in a Historical Overlay which requires me to go through extra hoops if I want to do ANY renovations.  With all this being said do I have a right to get my earnest deposit back?  if I take that the seller mispresnted the zoning and use?  Property is in New Jersey.

Stanley Bronstein · Answer

@Toan Hoang Impossible to determine with the limited information you provided.

What does the contract say?

What does the correspondence between the parties say?

During what phase of the purchase did this happen?

How much is your earnest money? If it's a small amount, it's not worth pursuing. If it's a larger amount, it might be.

Bear in mind that you probably need to get an attorney involved and they don't work for free. Make sure you don't throw lots of money at an attorney in the hopes of getting a little bit of earnest money back.

TIP - One thing you might be able to do (depending on the circumstances), if to send notice to the escrow agent (or escrow attorney) that you object to the release of your earnest money. Most escrow agents will then throw up their hands and tell the Seller and Buyer to work it out. In that scenario, you might be able to work out a compromise and get half of your earnest money back.

NOTICE - I am not your lawyer, so you should not take this as legal advice.

Good luck

James Galla · Answer

Ask your lawyer.

Kevin Sobilo · Answer

@Jessica Zolotorofe, I agree even if a representation is false it isn't a sure thing.

Many times the parties resolve these types of things amicably though. So, I'll hope for the best!

Jessica Zolotorofe · Answer

@Kevin Sobilo

Possibly. Though I still think the obligation was on the buyer to confirm. Just like if the seller said the roof was sound and the inspection showed a leak. Any intentional misrepresentation (which is not an easy thing to prove) then maybe, but that would require litigation and depending on the size of the deposit may not be worth it. Maybe a stern letter from counsel, or the threat of litigation would be enough for the seller to give back the deposit without having to go that route. I think the answer here is she needs guidance from her attorney (hopefully she has one!)

Kevin Sobilo · Answer

In Pennsylvania the AOS that I use covers that as part of inspections. A buyer can select to check zoning, or anything else that is a concern as part of "inspections". This gives the buyer the same right to renegotiate or terminate based on the findings as long as its done within the inspection period. If the contract is terminated in that case the buyer would be owed their earnest money deposit back. I

Check your AOS and see if there are similar conditions in yours and if you are still within your time periods. Also, talk to a lawyer or your real estate agent.

Jessica Zolotorofe · Answer

@Kevin Sobilo Agreed completely. That's what I was saying. I imagine if she is about to close title (she said "settlement is approaching"), then the inspection period has passed, but in states where it is not included and there is just a physical property inspection (like NJ) a lawyer should always include that type of due diligence as part of the inspection period when preparing the rider, assuming that state provides for an attorney review period.

Jessica Zolotorofe · Answer

Likely you had a time period to conduct inspections and diligence and if that period passed, you are not entitled to the deposit back. Unless you can prove that it was an intentional misrepresentation, I doubt you would get very far. Always do your diligence right away!

Kevin Sobilo · Answer

@Jessica Zolotorofe, about the only thing I can think that this buyer may have to hang their hat on are any representations the seller made about the property.

If the seller stated in a disclosure what the zoning of the property was or that the property wasn't part of any historical district and it was incorrect then perhaps there would be some recourse even if the due diligence period had passed.

Wayne Brooks · Answer

None of us know what your contract says.

Sam Shueh · Answer

Contact the listing agent with the facts and submit a cancellation notice see if they will sign the agreement.

Walking away from a deal, can i get my money back?

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