Hello everyone and thanks in advance for any pointers or advice.
I, as a seller, have had this home in escrow for over a month. Buyers were qualified and solid offer above asking. Inspection report came after 15 days and all repair requested I agreed to. One of the requests was for a larger catchment tank. (This home is in Hawaii where water comes from rain catchment.) Because offer was well above asking and they seemed serious I agreed and spent 5k for a new tank installed.
The day all the repairs are completed and tank installed (after $6,000.) they send termination of contract notice, 2 weeks before scheduled close. They claim I broke contract due to the land survey report not being submitted on time. Which is true, I called all surveyors the day escrow opened and due to the location of property the earliest survey could be completed was after the date on contract. My agent informed sellers and their agent of the situation and delay very early on and they said no problem. Unfortunately this conversation was over the phone and not in writing. But they are not denying that they were informed and agreed to the delay.
Yet still they are backing out citing this breach of contract on my part. I had been in touch with them just a few days before they cancelled, asking them details of how they preferred the catchment installed. They did not mention anything about survey being late on that day, rather they gave me specific instruction where and what size catchment to install.
Bottom line, I know they have other reasons for backing out but are using the 0-1 as an excuse to try and hang on to their deposit (which is over 3k). I told them I was contesting this and wanted the deposit, to which they responded "Seller broke contract and are demanding deposit returned."
Mediation is suggested in contract if agreement cant be made.
What play do I have here.
Here is terminology n contract:
K-2 Survey. Within ______________ ( ) days after the Acceptance Date, Seller shall, at Seller’s sole cost and expense, have a land surveyor licensed in the State of Hawaii: (a) survey the Property even if the boundary points are visible and; (b) if improvements exist along the Property line, provide Buyer with a map (with surveyor’s stamp) and accompanying report to show the perimeters of the Property and the location of any improvements in the vicinity of the perimeter Property lines. The survey and map may not address whether improvements on the Property are in compliance with State and/or
County requirements, subdivision covenants, conditions, and restrictions, and/or condominium property regime requirements.
O-1 Termination Due to Default. This paragraph shall not apply to a particular obligation or contingency if Paragraphs O-2 or O-3 have been specifically designated as a termination provision.
In the event that Buyer is in default for failure to perform Buyer’s obligations under this Purchase Contract (Seller not being in default), Seller may terminate this Purchase Contract, and (a) bring an action for damages for breach of contract, or (b) retain the initial earnest money deposit and all additional deposits provided for in this Purchase Contract. However, if the Buyer has performed the obligation prior to Seller delivering written notice terminating this Purchase Contract, then his termination provision shall not apply to such obligation.
In the event Seller is in default for failure to perform Seller’s obligations under this Purchase Contract (Buyer not being in default), Buyer may (a) terminate this Purchase Contract and bring an action for damages for breach of contract, or (b) seek specific performance of this Purchase Contract. However, if the Seller has performed the obligation prior to Buyer delivering written notice terminating this Purchase Contract, then this termination provision shall not apply to such obligation.
That’s a tough situation your in. Because an extension was not requested in writing and an agreement was not formally made you may be stuck. I had a situation where the buyer backed out after I made updates per the home inspection. Unfortunately the earnest money was only $1000. You definitely should consult an attorney.
Your agent should have advised you to address the survey and repair matters contractually. The contract always rules, not verbal communications. That mistake is on your agent for this oversight. Whether time is of the essence for the survey depends on other possible language in your contract. You may want to consider whether to try and negotiate a split of the E/M or take the time to deal with mediation. Personally, I would have a come to Jesus meeting with the agent and have him/her reconsider their commission structure since you're in this very situation because of a mistake that should never have happened.
"Unfortunately this conversation was over the phone and not in writing."
Lesson learned - Get a better broker next time.
I'm not licensed in HI but in CO if it isn't in writing, it isn't in the contract.
Learn from this going forward. I'm sorry your home fell out of contract.
@Sean Dougherty I would think it's better to go back on market and take advantage of the fact that rates are low right now to get another buyer. Mediation and/or litigation usually only benefits the lawyers, and ends being a lose-lose for the principals, but that's just my 2 cents.
Your best argument seems to be that the breach was not material and that, accordingly, it warrants at best a suspension of performance by buyer until the matter is rectified but not a termination of the contract. Without analyzing the full contract I frankly think this is a pretty good argument where I live. You will need to have a local lawyer evaluate it in light of Hawaii law. Good luck.
Give them back deposit- legal fee. Sign a waiver.
Put your property back on the market and fish for another offer. You might get one quickly and can release the current buyer with no loss other than time while you go through the process. The improvements may have added some value to your property or would be something the next buyer would request, so not necessarily a total loss.
I was thinking similar to @Darius Ogloza that the delayed survey might not be material to the deal if it was only a day or two late and showed no issues. Showing issues would be an out for the buyer. This is a legal question based on case law, so you will need an attorney to make any meaningful progress. Try to get a free phone consultation for an opinion. You could end up spending a good bit of what you are trying to retain, then lose the deposit anyway, if you go through the whole process.
As a broker in Hawaii, I agree with comments. This is way too costly to litigate, and you don't have a leg to stand on for keeping their deposit. Let the buyers walk, move on, find a new buyer. But your agent should have gotten the survey extension in writing!