Buyer backed out at closing, what to do?

22 Replies

Hey all. Unfortunately my second post here on BP is an unfortunate one...My house was listed for 9 days when I got a full price offer from a pre approved buyer. Of course I accepted. It passed inspecton with a couple small things and appraisal passed easily. I sold most of the furniture and rented a temporary apartment and storage unit until the next deal comes along. Today my realtor called..the buyer wants to back out for fear of possible layoffs at work. Now I am stuck with a completely empty house, an apartment, and no sale. We were set to close on the 15. Do I have any legal recourse on this aside from the $1000 earnest money? I will likely end up selling for less now. The house looked great staged, but now just looks..empty... Anyhow sorry for the rant, but im not sure where to go from here. Thank you for any insight.

Jake Kraft

What does your contract say?  It probably says liquidated damages.  If so, then, at best, you can keep the EM.  Even that may not be the case if they still have contingencies in effect.

Restage it, if you think that's necessary.  Get it back on the market and find a new buyer.  Next time, wait a bit longer before taking all the actions that assume you have a sale.  I'd have left it staged and taken backup offers.  No deal is ever done till all the documents are signed.

Jon Holdman

    I'll go through the contract this evening, although I waited until everything except closing was signed to move "just in case". the last week was my only chance to move before closing and re-staging is not much of an option since I sold most of my furniture. At the point were at I assumed the buyer was required to buy under signed contract, and nothing stopped the sale except for the buyer changing their mind.

    This is why $1,000 isn't really much EM.

    The usual contingencies are for obtaining financing, issues from home inspection, flood zone issues. It sounds like your buyer has passed this stage so definitely check the contract both parties agreed too as you may have the option to push the buyer to close or force legal action. Your realtor should be able to guide you on the contract verbiage.

    Well just an update..the contract leaves me with the option of specific performance if all contingencies are met. My realtor sent me all the signed documents and they are going to my attorney tomorrow. Ill keep you all posted.

    @Jake Kraft - The first thing to do is to sit down and review the contract and your options with your Realtor and his/her broker. Then possibly seek legal options with a local attorney.

    Buyers don't get to back out because of fears or nervousness. I am not an attorney, and especially am not one in your state, but the sales contract they signed is, in fact; a legal and binding document. If they become guilty of breach-of-contract then I think it likely that you are due substantial damages: certainly all costs, interest on lost funds, living expenses for you, and whatever else your clever attorney can think of.

    stephen
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    Originally posted by @Jake Kraft :
    Hey all. Unfortunately my second post here on BP is an unfortunate one...My house was listed for 9 days when I got a full price offer from a pre approved buyer. Of course I accepted. It passed inspecton with a couple small things and appraisal passed easily. I sold most of the furniture and rented a temporary apartment and storage unit until the next deal comes along. Today my realtor called..the buyer wants to back out for fear of possible layoffs at work. Now I am stuck with a completely empty house, an apartment, and no sale. We were set to close on the 15. Do I have any legal recourse on this aside from the $1000 earnest money? I will likely end up selling for less now. The house looked great staged, but now just looks..empty... Anyhow sorry for the rant, but im not sure where to go from here. Thank you for any insight.

    Jake Kraft

    Thanks all for weighing in. Brian talking to the broker is a good idea, ill schedule some time friday. But at this point it looks like we are moving forward with legal action. I have spoken with my realtor several times and he is agrees that its the course to take. Thanks all

    After advice from attorney,
    Re-stage the property and get it back on the market. You are entering the hottest time of the year to sell, the sooner you get it on the market the better, maybe you will get a better offer. In this businees never count your chickens until escrow closes. Good Luck!

    take the deposit, move on.....don't punish these people, if they are in financial hot water, and waste your time doing it.

    Taking the Earnest Deposit isn't so cut and dry. Both parties have to agree to release the funds from the Escrow account. If there is a disagreement and you can't come to an agreement the funds may be released to the courts and you'll have to pursue the legal path

    May want to have your attorney write a letter saying you want to keep the Earnest Money. If that doesn't work For $1000 I'd give the deposit back and move on. A good attorney is $250 per hour...you can do the math on where this will go if you end up in court.

    Lesson learned. It's not a done deal until your at closing and the funds are exchanged.

    Originally posted by Account Closed:
    take the deposit, move on.....don't punish these people, if they are in financial hot water, and waste your time doing it.

    I agree. Legal action could be such a waste of time and money. You can't force them to buy it and any judgment you could get will cost you legal dollars if your buyers have none.

    The staging vs. no staging concerns seem overstated to me. Your appraisal came through on the purchase agreement price, correct? That has nothing to do with staging. If the house is the right value, there are other buyers at the same price and they won't necessarily need to be staged.

    Get the defaulting buyers to release the EM to you and let them move on. Get the property back on the market tomorrow. If you get no action in a week, then you can consider staging it.

    $1K EM is really low. How much are selling the property for?

    $1000 is typical here, even $500 is common. It sold for $181,000. The market here Isnt the best right now..not bad, but not great. Perhaps rules and contracts differ here, buy you can sue and force a pre approved buyer to purchase after contingencies are removed under the specific performance clause in my contract. Same clause that can force a seller to sell if they change their mind. I was planning to afford a 3mo lease on an apt, and pocket a nice $54k after the sale. Now I have a mortgage, an apartment, both utilities, and everything in storage. If you think It doesnt deserve punishment, try on my shoes.

    The point of having a contract is so that everybody knows what they can and cannot do. If all contingencies have been satisfied then I would insist that they conclude their contractual obligation to me and buy the property.

    If they want to modify the contract I would be willing to let them 'buy me out' by repaying all the costs I've incurred, and will incur, as well as any losses resulting from the need to re-market the property. Put a list of those together and present them - so that they know you're serious and Also so they can visualize their risk. They are only asking for you to concede because all they are thinking about as their risk is that $1000. You need to get to work to make them realize the serious big numbers they will actually be on the hook for.

    They give you nothing by releasing the $1000. to you - it's already your money. If you have fulfilled your side of the contracted deal - the $1000. is already yours.

    That would be my position. It might be a bluff to some extent - but I'd never blink.

    BTW: do not ever mention the $54K as that is not a 'real' loss. Talk about and maximize your actual outlay type losses.

    stephen
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    Originally posted by @Jake Kraft :
    $1000 is typical here, even $500 is common. It sold for $181,000. The market here Isnt the best right now..not bad, but not great. Perhaps rules and contracts differ here, buy you can sue and force a pre approved buyer to purchase after contingencies are removed under the specific performance clause in my contract. Same clause that can force a seller to sell if they change their mind. I was planning to afford a 3mo lease on an apt, and pocket a nice $54k after the sale. Now I have a mortgage, an apartment, both utilities, and everything in storage. If you think It doesnt deserve punishment, try on my shoes.
    Originally posted by @Jake Kraft :
    $1000 is typical here, even $500 is common. It sold for $181,000. The market here Isnt the best right now..not bad, but not great. Perhaps rules and contracts differ here, buy you can sue and force a pre approved buyer to purchase after contingencies are removed under the specific performance clause in my contract. Same clause that can force a seller to sell if they change their mind. I was planning to afford a 3mo lease on an apt, and pocket a nice $54k after the sale. Now I have a mortgage, an apartment, both utilities, and everything in storage. If you think It doesnt deserve punishment, try on my shoes.

    I've kept buyer's earnest money but I've never held them responsible for the damages you're talking about. Just seems like a waste of legal dollars. Specific performance isn't regional, it's standard RE contract law. This force that you speak of would likely need be court ordered. Buyers that are truly concerned about not having a job aren't going to buy your property because you threaten them. Your "pre approved buyer" can get unapproved in about 5 minutes by reporting a loss of income or other debt to the lender tomorrow.

    The whole legal thing will cost you all time and money. I'm assuming the escrow hasn't funded, so it's not like the the lender funds are sitting there? If you push the issue tomorrow and the buyers don't agree to perform, how soon do you think you'll get a court date? So 3 months from now, maybe you'll have a judgment for the buyers to perform but buyers without a loan. Yay.

    Think hard on the time you might lose by forcing this issue. What will you gain if you force them to buy 3 months from now, and they don't or can't? You still have to make the mtg payments and pay the apt. rent.

    Also remember, while you're pursuing any specific performance action, you can't sell the property and the broker is likely not allowed to relist it for sale.

    marie thanks for your thoughts. I should have mentioned in my first post that I work for the same company as the buyer, but at a different site. There has been unsubstantiated rumor of small layoffs in the company for over a year. That is what irks me most. Why waste both our time on a whim and then bail due to you knew way before even the offer stage. if I dont have a suit for specific performance, I will sell at an unstaged price and recoup my lesser damages from this buyer through collections. I am not a lawsuit-happy person. I have never even hired an attorney before this, let alone gone to court. the buyer thinks he can just walk after causing

    There is a chance that the buyer decided you were charging too much for the home and back out. Did you say you would knock of $5000 on asking price to see if the buyer will reconsider.

    Joe Gore

    hey all

    I hate a discussion left hanging, so heres an update...I finished moving out and we re-listed. I did let the threat of legal action hang for a few days but the buyer released the em and we moved on. Two offers came in within a few days and we accepted one for 187, 000..$6, 000 over asking with less closing costs. I may have to move a little pending appraisal, but its a better offer no matter how you look at it. So in the long short of it, you all were right. Re list and move on. Thanks all, my next post should be an investment property question once this one is closed. Thanks for the advice thus far

    Jake Kraft

    Originally posted by @Jake Kraft :
    hey all

    I hate a discussion left hanging, so heres an update...I finished moving out and we re-listed. I did let the threat of legal action hang for a few days but the buyer released the em and we moved on. Two offers came in within a few days and we accepted one for 187, 000..$6, 000 over asking with less closing costs. I may have to move a little pending appraisal, but its a better offer no matter how you look at it. So in the long short of it, you all were right. Re list and move on. Thanks all, my next post should be an investment property question once this one is closed. Thanks for the advice thus far

    Jake Kraft

    Thanks for the update. Do you restage?

    No I didnt re stage. The house was completely empty and cleaned. I assumed a staged home brought better offers but in this case it didnt work out that way.

    Originally posted by @Jake Kraft :
    No I didnt re stage. The house was completely empty and cleaned. I assumed a staged home brought better offers but in this case it didnt work out that way.

    I was sure your concern about staging was overblown. You already had a buyer at full price with a supporting appraisal. Staging is not a function of pricing or value. Depending on your market it may bring in more buyers for showings, it may generate more offers. But not necessarily higher or better offers.

    It's not done in my market for anything under $300K.

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