To breech or not to breech?

Question

Found a single family that was converted into a two unit home years ago. The seller’s agent presented the property as such but all comps were amongst other single family units which are doing great in this up & coming neighborhood. My math was based on that but later found out comps would truly be amongst other duplexes which aren’t as plentiful & valuable. I’d be overpaying and with rehab, $60k more comparatively. I didn’t have an agent and trusted the seller’s agent’s bad intel. I’m trying to back out. No contingency as it was “as is” and I was going in with cash so no financing. My partners have backed out and I’m in the hook.

I need sage advise. Otherwise, I’m waiting to see if seller will be amenable with clearing me from the contract, renegotiate or face being sued for breech.

Help!

FYI: Lesson learned: Always put a contingency even if you don’t need it until you do need it.

I need sage advise. Otherwise, I’m waiting to see if seller will be amenable with clearing me from the contract, renegotiate or face being sued for breech.

Help!

FYI: Lesson learned: Always put a contingency even if you don’t need it until you do need it.

Mike Cumbie · Answer

Hi @Amos Raymond,

Couple points take with a grain of salt. As an investor I would look for "Highest and best use" of property. If it was comped and makes money as a single family....... convert it back. Getting building inspectors to make single family dwellings into duplex properties is the hard part. Going the other way is easy.

Depending on how far you are you may just lose your deposit if you back out. Also depends on if you are an attorney state and how hardball everyone is playing.

Good Luck!

JD Martin · Answer

What state? In my state there are a couple of contingencies that apply unless the buyer specifically waives them. Beyond that:

1. Is the house a legal conversion? If not, there's your out.

2. Depending on the state, using the seller's agent might be your soft spot. Some courts like to see separate reasonable representation for both parties.

If you're not in it for too much earnest money, you can probably take your chances. Breech of sale lawsuits are extremely rare and courts even more rarely award anything since the seller is usually not out anything, i.e. they still have the property and can sell it to someone else just as easy. Be prepared to lose your earnest money unless you can find a shady loophole that they've used.

Justin Abdilla · Answer

I think maybe making a payment to the seller to execute a mutual release is the best way to go.  Suing for damages on a breach of contract isn't going to be great because as Account Closed have noted, you have a claim here for fraud in the inducement or mutual mistake of fact.  Mutual mistake of fact is a really interesting defense here, because the seller is marketing the property as being comped to these duplexes and you believed the property is a good comp to these duplexes, but it's also true that it isn't a good comp with the selections.

The thought that you're not represented is also interesting here, because the seller's attorney is technically representing you when providing statements that he or she knows you will rely on, as long as she didn't say something like "hire your own attorney to double check these" or "do your own due diligence."  This is a really common area of legal malpractice and claims against attorneys that our continuing education warns us about at least a dozen times every cycle.

Please don't construe any of the above as legal advice, it's really just an academic analysis of your situation that I hope you can bring up to your lawyer when you do hire one.  You need one, and this will hopefully get you googling in the right place to understand the types of claims against you and the defenses you may have.  Good luck getting out of this one and I hope it's not too painful.

Cassi Justiz · Answer

Did you have any sort of due-diligence period? Inspection periods, etc? Typically even on an "as-is" offer, you have at least some time period before you are officially "locked in."

If you are not familiar with the real estate contracts of your state, it would probably be worth it to pay for an attorney to review your contract and see if you have any legitimate outs. You will probably find that it's worth loosing your earnest money if that's what it takes to walk away.

Account Closed · Answer

If you are sure you want out, I'd tell them because the agent gave you comps, that you relied on, the seller waived the as-is clause as it related to value. Threaten to sue the agent and the seller if they don't return your earnest and void the contract because they breached it.

I think you could actually win on this basis, but usually just the threat of a plausible winning lawsuit is all it takes, in my experience.

I have great luck getting folk to settle with a tough bluff backed by a potentially winning case. Which their lawyers will tell them.

To breech or not to breech?

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