Sellers wanting to sue for liquidated damages.

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Sellers wanting to sue for liquidated damages.

Adam Ruiz
Rental Property Investor · Boise, ID · Member since 2020 · 6 posts · 2 votes

With everything going on, we had to make an unfortunate decision and pull the plug on our upcoming closing. I feel terrible for all parties involved but without a true economic foresight I can't reasonably jump into this new house. I told my agent that we understood we'd lose our EMD. But now the sellers broker put it in their head to sue me for liquidated damages. Above and beyond my deposit. The house needed to have some work done before it should have been listed so we requested it. They claim they didn't know it was an issue but I doubt anyone else would have put an offer without it being corrected. I'm not asking for sympathy but understand it's been a stressful couple of weeks and this is adding to it. I want to do right by everyone involved but getting sued into buying a house is a unmanageable pill to swallow.

Thoughts or advice?

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Aaron Morrow
Real Estate Agent · Seattle, WA · Member since 2020 · 62 posts · 42 votes
6y
Originally posted by @Adam Ruiz:

With everything going on, we had to make an unfortunate decision and pull the plug on our upcoming closing. I feel terrible for all parties involved but without a true economic foresight I can't reasonably jump into this new house. I told my agent that we understood we'd lose our EMD. But now the sellers broker put it in their head to sue me for liquidated damages. Above and beyond my deposit. The house needed to have some work done before it should have been listed so we requested it. They claim they didn't know it was an issue but I doubt anyone else would have put an offer without it being corrected. I'm not asking for sympathy but understand it's been a stressful couple of weeks and this is adding to it. I want to do right by everyone involved but getting sued into buying a house is a unmanageable pill to swallow.

Thoughts or advice?

Hello, adam. I have not read what anyone else has said so I apologize if this has already been covered. I am a local Realtor int he Seattle area. I know each state/MLS's have different forms with different wording. Do you have anything on your purchase and sale that covers options if Buyer Defauslts? On our form it states "Default: (Check only one) 1) Forfeiture of Earnest Money; 2) Seller's Election of Remedies."

99.9% of agents always check the first one so per the contract the seller can only come after the EMD... Does your PSA have an item in it that clarifies this? My clients never check option 2...


Here is another article that might help you on this: 

https://www.lawyers.com/legal-info/real-estate/residential-real-estate/sellers-remedies-and-real-estate-sales-contracts.html

Again, this should not be considered legal advice since I am not a RE Attorney nor to I run my RE license in your state. 

I hope this was helpful!

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  • Account Closed
    Member since 2020 · 28 posts · 41 votes
    6y

    Lawyer UP is the term today.



    .  Sellers know overnight Value went down at least 30%  or more.

    0Reply
  • Kirk R.
    Peoria, IL · Member since 2013 · 967 posts · 383 votes
    6y
    Originally posted by @Adam Ruiz:

    With everything going on, we had to make an unfortunate decision and pull the plug on our upcoming closing. I feel terrible for all parties involved but without a true economic foresight I can't reasonably jump into this new house. I told my agent that we understood we'd lose our EMD. But now the sellers broker put it in their head to sue me for liquidated damages. Above and beyond my deposit. The house needed to have some work done before it should have been listed so we requested it. They claim they didn't know it was an issue but I doubt anyone else would have put an offer without it being corrected. I'm not asking for sympathy but understand it's been a stressful couple of weeks and this is adding to it. I want to do right by everyone involved but getting sued into buying a house really pisses me off.

    Thoughts or advice?

    pisses me off

    i had a deal i busted & other side kept earnest money.  i was getting upset.  Another BP gave me some really good advice.  it's a business decision.  it's not personal. (easier said than dun ikr?) 

    1Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    6y

    What does your contract say?  Remedies for default are spelled out in your contract.  But practically, it may be hard for them to prevail.

    0Reply
  • Kirk R.
    Peoria, IL · Member since 2013 · 967 posts · 383 votes
    6y

    I've never heard of anything but em changing hands.  I would really like to hear someone else's experience that has had to lawyer up.  But anyone can sue anyone.  just curious about how much money is this deal? lawyers can get expensive quickly. 

    0Reply
  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    6y

    I would worry zero about this. 

    First, they have to have actual damages and they have to prove the damages. That means they have to put the house back up for sale, take a lower price, and then sue you for the difference, plus perhaps attorney fees. There's no such thing as hypothetical damages. 

    Second, no attorney will take this on spec, so they will have to pay their attorney on the front end and try to recover those fees.

    Finally, RE deals fall through all the time. That is the point of earnest money. It would be unlikely a court would hold you to damages based on today's extenuating circumstances. 

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  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    6y

    I actually just had a transaction where we had 2 buyers in a row default. We ended up selling it at a higher price, but my seller was fully prepared to sue the defaulting buyers. Remember for some people its not going to be a straight logical decision. You pissed someone off and they may in fact sue to get even, even if that means they lose more money doing so. This may hang out there til he ends up selling, and you will need to pay attention to that end sales price. 

    You could attempt to negotiate a release of liability now in exchange for something. 

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  • Adam Ruiz
    OP
    Rental Property Investor · Boise, ID · Member since 2020 · 6 posts · 2 votes
    6y

    @Russell Brazil thanks. What would you recommend settling on?

    0Reply
  • Adam Ruiz
    OP
    Rental Property Investor · Boise, ID · Member since 2020 · 6 posts · 2 votes
    6y

    @JD Martin I appreciate the advice. 🤞🏼 It works out for everyone involved.

    1Reply
  • Michael Belmore
    Rental Property Investor · MA · Member since 2020 · 98 posts · 77 votes
    6y

    @Adam Ruiz

    Hi Adam,

    Usually a clause would be spelled out in the offer to purchase regarding liquidated damages, if not, it should be added in addendums.

    - Mike

    0Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    6y

    @Adam Ruiz submit a formal request for your EMD back and do not sign anything releasing the contract for them to relist the property. Basically tell them if they want you to release the contract, give your money back. Tell them you were unable to close the deal due to corona virus financial and health concerns.

    Here is the reality, if you dispute your earnest money, they can't relist until they give it back. So it is their call. They chose to get nasty. 

    3Reply
  • Bill B.
    Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
    6y

    Look at your contract. If your realtor was on the ball and on your side they should have checked the box that says if buyer defaults seller to accept EMD as full recourse. If the seller or sellers realtor wanted to change that (I've never had one changed, ever) you would have been told that and signed an addendum.

    1Reply
  • Account Closed
    Member since 2020 · 28 posts · 41 votes
    6y

    Suing for liquidated damages seems odd.   Suing for specific performance seems legit.

    So much info here is illegitimate.  Go pay a few 1000 and see a RE lawyer. On a landlording thread a guy advocates for illegal things, has no clue muscle isnt proper.

    0Reply
  • Aaron Morrow
    Real Estate Agent · Seattle, WA · Member since 2020 · 62 posts · 42 votes
    6y
    Originally posted by @Adam Ruiz:

    With everything going on, we had to make an unfortunate decision and pull the plug on our upcoming closing. I feel terrible for all parties involved but without a true economic foresight I can't reasonably jump into this new house. I told my agent that we understood we'd lose our EMD. But now the sellers broker put it in their head to sue me for liquidated damages. Above and beyond my deposit. The house needed to have some work done before it should have been listed so we requested it. They claim they didn't know it was an issue but I doubt anyone else would have put an offer without it being corrected. I'm not asking for sympathy but understand it's been a stressful couple of weeks and this is adding to it. I want to do right by everyone involved but getting sued into buying a house is a unmanageable pill to swallow.

    Thoughts or advice?

    Hello, adam. I have not read what anyone else has said so I apologize if this has already been covered. I am a local Realtor int he Seattle area. I know each state/MLS's have different forms with different wording. Do you have anything on your purchase and sale that covers options if Buyer Defauslts? On our form it states "Default: (Check only one) 1) Forfeiture of Earnest Money; 2) Seller's Election of Remedies."

    99.9% of agents always check the first one so per the contract the seller can only come after the EMD... Does your PSA have an item in it that clarifies this? My clients never check option 2...


    Here is another article that might help you on this: 

    https://www.lawyers.com/legal-info/real-estate/residential-real-estate/sellers-remedies-and-real-estate-sales-contracts.html

    Again, this should not be considered legal advice since I am not a RE Attorney nor to I run my RE license in your state. 

    I hope this was helpful!

    5Reply
  • Michael HaasBusiness Member
    Real Estate Agent · Sammamish, 🌧️ Seattle Investor-Agent | 🤑 Helped 400+ Clients Invest in Real Estate | 🏘️ Owns 23 WA Rentals & Airbnbs | 🏗️ Built 5 DADU's | 📈 You Can Do It Too · Member since 2016 · 725 posts · 3k+ votes
    6y

    @Aaron Morrow is right- usually page one of your PSA covers this. 

    PS: to the poster that said “overnight Value went down at least 30%”... you’re full of it. The housing market is not the stock market, and it most definitely has not declined (yet) in most major markets. The housing market doesn’t do anything overnight, and  it’s unclear whether there will be much of a dip at all given all the QE and low mortgage rates the Fed is pushing through. 

    PPS; Just curious, what pushed you to back out?

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  • Account Closed
    San Jose, CA · Member since 2015 · 4k+ posts · 3k+ votes
    6y

    Earnest money IS liquidated damages, so they're out of their mind, unless your contract specifically says they can keep the earnest money AND also come after you for actual damages on top of them. Tell them to sue, and you'll counter-sue and be asking for your attorneys fees, too. Option B, they take the EMD and call it good and be grateful to have it.

    You can quote this case, if you want to sound like you have a lawyer :-)

    https://isc.idaho.gov/opinions/44594.pdf

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