Seller backed out at closing!

80 Replies

To me it sounds as if there were lots of issues that should have had you hard stop until the requirements were met, such as estoppel.  If you continued to proceed, and left yourself with no options or overlap as to where you were living at the time, well, I know it sounds harsh, but I think that's on you.  

I don't think your damages will amount to more than the cost of an attorney, and it's likely, depending on your state laws, that you can't file in small claims court because it's a real estate matter.  I'm given to understand that in many states, real estate issues must be filed in superior court.  maybe your state is different.

The situation totally sucks, and you have definitely been wronged, but whether to proceed with suing the seller should be a dollars and cents decision, not an emotional reaction based on anger.  I totally get it, but in the cold light of day, it could cost you more to prevail than you've already spent.  

I'd take it as a significant learning experience and move on.  

Did I miss it? Where is your agent? I had a similar instance. My agent/ broker not only got his commission I like you was so mad I didn’t want the property anymore. I didn’t have to buy it. But I watched the agent make their life miserable and he still got paid. It was a small deal. 45k sfr. The seller paid before court. And real estate hearing. 

It is very common in real estate contracts that the only remedy for the buyer if the seller does not close is "liquidated damages".  That is, you get your earnest money back.  While it is frustrating to have spent money on inspections and other up-front costs, there's rarely any provision for the seller to refund those costs if the deal does not close.  Further, standard contracts usually have a place where "specific performance" could be chosen as the penalty.  But that's not usually selected.  Get out your contract and have a look.  If it states liquidated damages and you get your security deposit back you don't have much leverage to get other costs paid by the seller.  Frustrating, but the reality of buying real estate.  Look at your contract.

Originally posted by @Jon Holdman :

It is very common in real estate contracts that the only remedy for the buyer if the seller does not close is "liquidated damages".  That is, you get your earnest money back.  While it is frustrating to have spent money on inspections and other up-front costs, there's rarely any provision for the seller to refund those costs if the deal does not close.  Further, standard contracts usually have a place where "specific performance" could be chosen as the penalty.  But that's not usually selected.  Get out your contract and have a look.  If it states liquidated damages and you get your security deposit back you don't have much leverage to get other costs paid by the seller.  Frustrating, but the reality of buying real estate.  Look at your contract.

What you are describing is a default provision which states that the return of the deposit is the buyer's sole remedy. While that is a fairly common provision, especially for buyers who are not aware of how one-sided it is, that is not a liquidated damages provision. 

A liquidated damages provision would be on top of the return of the deposit... an amount agreed to in advance because actual damages would be difficult to estimate.

It might be different where you live but I would never even consider paying a up front fee to a REA as a buyer, or seller for that matter. To me it sounds shady, maybe it’s different in your state or city but I would contact the Keller Williams HQ and ask if that sounds right, they don’t want offices doing shady things in their name.

I didn't read all of this.

Next time in a contract have a contingency in the purchase and sale that ALL of the items listed have to be received for due diligence period to start.

This way you generally know right away if the seller is hiding stuff. If they know you will not spend one dime until you see the good, the bad, the ugly from them then they will work to get you everything if they really want to sell to start the clock. If not then it is very telling they are looking for a sucker.

They are looking for someone to give them stuff piece meal and drop the really bad stuff they are hiding at the end when the buyer has spent lot's of money and time trying to make a deal work. The buyers often feel trapped and must decide to take losses and walk away or still close on the property. It's dirty pool played by sleazy sellers.

This can be especially bad for 1031 exchange buyers where the seller pulls them along and the 1031 buyer is past their ID period and now is looking at huge tax penalties if they do not buy.

Did you show up to closing on the closing date and document? Generally even if seller says they will not close the buyer shows up (willing and ready) to close on the contract date given. If the buyer and seller do not show up the seller can claim the buyer was not ready to close and did not attend the closing.

The reality is the seller saying they did not know they had a second mortgage is baffling. They would have had to sign something for that when they got it. You could talk to an attorney but likely they tell you this would get very expensive and you just get a judgment that is worthless and waste big time and even more money chasing bad. If the seller is living there in one of the units I have not heard of a judge throwing them out to force  a sale.

For your next property see if you can buy a 4 unit instead of a 3 unit. You get better break even occupancy for the mortgage. Example one vacant unit in a 3 unit is 33.3% vacancy but in a 4 unit it is 25%. Check with your inspector if they can give you  a price break on the next property to inspect because of what happened. See if your lender will shave some costs for you as well on the next property since you took losses on this one.

No legal advice given.  

Originally posted by @Michael J. :

It might be different where you live but I would never even consider paying a up front fee to a REA as a buyer, or seller for that matter. To me it sounds shady, maybe it’s different in your state or city but I would contact the Keller Williams HQ and ask if that sounds right, they don’t want offices doing shady things in their name.

 It is not shady, and it is actually something the Department of Justice wants to see....that being many different types of ways agents charge for their services.  The DoJ encourages the industry to come up with all kinds of pricing models. They dont want to see everyone charging the same amount and being paid in the same format.

You may be able to sue under specific performance. I had the same thing happen recently. Once the seller received the papers from my attorney they decided to proceed with the sale about a month later. The fees for my attorney were also deducted from the seller’s payout at closing.

Originally posted by @Tom Gimer :

...

Estoppel certificates are promises made by the tenant to the prospective buyer conerning the status and terms of the lease, deposit, etc. Based on OP's facts this deal should not have gotten this far.

Estoppels are not promises, they are attestations - that is why they are signed and witnessed.  

The word estoppel itself comes from the French word estopail (a 'bung').  In modern common law it is a device used to prevent, or "estop", a person from making assertions or from going back on his/her word.   When you are performing your diligence, you would create an estoppel for each tenant or service provider based upon the leases, contracts, and other information provided by the Vendor and then have the tenant review it and either agree (swear) it is correct, or amend the estoppel and sign/swear the amended estoppel.   This is how you discover things like "Unit 1's rent is $800/mth, but the Vendor is only collecting $600 because the tenant vacuums the stairwells and shovels the walkways.

When the Vendors story and the tenant's story to not align then "Luuucccy ... you got some 'splaining to do"

Originally posted by @Gregory Hiban :

@Rachel Degennaro I am with Keller Williams, and I can tell you that me/my office doesn't see a cent until the closing table. More likely it is that specific broker within KW, probably not the direct agent with whom you worked (but I can't be sure). Either way, their explantation that they have costs .... that is why they get 30% of an agent's commission without doing any of the selling directly.

 I am putting a link to the page that Keller Williams sent me, I had to pay it before they would put an offer in for me.

I uploaded it to imgur: 

http://i.imgur.com/k1sZj2A.jpg

@Rachel Degennaro Never seen the document before in my life. What you have to understand is that Keller Williams offices are essentially franchises, so the individual owner of an office can choose to charge whatever fees they would like. I can tell you I just closed a deal a few weeks ago, and the buyer was not charged a nickel, my/my office's sole compensation was the commission offered by the seller. I would say a lot of offices do charge some sort of admin fee, but its usually only if the deal closes, they get the admin fee at closing, they don't charge it up front. Also understand, just about every fee you encounter can be negotiated.

Originally posted by @Rachel Degennaro :
Originally posted by @Gregory Hiban:

@Rachel Degennaro I am with Keller Williams, and I can tell you that me/my office doesn't see a cent until the closing table. More likely it is that specific broker within KW, probably not the direct agent with whom you worked (but I can't be sure). Either way, their explantation that they have costs .... that is why they get 30% of an agent's commission without doing any of the selling directly.

 I am putting a link to the page that Keller Williams sent me, I had to pay it before they would put an offer in for me.

I uploaded it to imgur: 

http://i.imgur.com/k1sZj2A.jpg

Rachel:

The only times I pay my buyers agent a fee is if I send him out to make an unsolicited offer on a property (since there is no listing agent) or if I ask him to do something where I know he's not being compensated by a commission (except for bringing coffee ... he just knows better than to show-up without one ;-) ).

We can help/advise you better if you tell us what your contract says. If specific performance is an option in the contract, sometimes an attorney letter threatening that action will get them to the table, if they think you are serious. Some require arbitration as a first step, if so, initiate that.

Originally posted by @Rachel Degennaro :

Yes, it's all in the contract, he is at fault, it just most of the people I have contacted about this normally go through this because the buyer backs out not the seller, so I was more or less wondering if anyone has gone through the horrible experience of the seller backing out.

I am planning to sue for damages, and maybe it doesn't amount to much but it makes me sick that after everything I went through to get this place he just doesn't show up to closing and I'm out all the money and time I've spent on it and out a place to live and nothing happens unless I sue him?  

I never show up for closings... at least when the buyer is there.. that is an antiquated cluster waiting to happen.. I have them e mail me docs then I fed ex them back or I go in at time the buyer will not be there.

I have successfully done a performance suit one time in Oregon... 2 plus years close to 20k in legal fees and AND this is the big and since I was paying cash 120k  I had to put that money in escrow the WHOLE amount and leave it there for 2 plus years as we litigated it.

I won... but ONLY because the seller was a no show at court.. and judge had no choice to rule for me..

End of the day this is what SMALL claims court was invented for..  your damages though real to you are hard to determine monetarily.. Myself I had given the seller 40k in cash release to her as EM and she would not give it back or sign the closing docs I had no choice

you on the other hand or out probably less on the monetary side and more on the emotion side...

I once had a land owner who went into contract with me to sell me their timber.... and timber is real property so this is germane.. he backed out.. I took him to small claims and judge gave me the 7500 judgment right on the spot.. seller was quite mad walked over with his check book and threw me a 7500 dollar check....

so that's the route I would take hopefully you have a nice size small claims .

Also I bet dollars to donuts your real estate contract if you used a state form will make mediation mandatory before you can sue anyway. 

that's whats happened to me in PA when buyers backed out last day and wanted their EM back.. I would not give it.. they would not sign so mediation was done and of course we end up splitting the baby down the middle.

That was my first thought @Tom Gimer .  It smelled bad the whole time.  Dew diligence was turning up yellow sighs.  I feel like she fell in love, its hard not to do, especially early on. If you have rose colored glasses on those yellow warning signs look like roses.

Hopefully she can bounce back soon.

Originally posted by @Gregory Hiban :

@Rachel Degennaro Never seen the document before in my life. What you have to understand is that Keller Williams offices are essentially franchises, so the individual owner of an office can choose to charge whatever fees they would like. I can tell you I just closed a deal a few weeks ago, and the buyer was not charged a nickel, my/my office's sole compensation was the commission offered by the seller. I would say a lot of offices do charge some sort of admin fee, but its usually only if the deal closes, they get the admin fee at closing, they don't charge it up front. Also understand, just about every fee you encounter can be negotiated.

I just bought a place in Vegas and the agency tried to hit me with a buyer paid admin fee.. I told them to remove it.. end of that story. 

This post has been removed.

@Lance Kawakami   I may be the only one thinking this  @Russell Brazil @Tom Gimer @Ann Bellamy

However watching your posts on this thread and others your not really that funny.. and your no help.

Most folks with experience and not beginners   that I know are quite the opposite polite respectful and pretty darn smart.

Not sure what you think your going to gain by your not so funny condescending posts.. @Mindy Jensen  

and maybe its just me...  but if would be nice if you would retool how you interact with folks on this site and if you 

have some unique experiences that you could help people, I am sure that would be appreciated..

Congrats to you for saving money and having the courage to make your first deal but this is a perfect example of buying a property just for the sake of buying a property! You are probably better off anyway as this has huge red flags all over it! Some shady business going on here

@Rachel Degennaro - I don't have any advice.  Just wanted to say that sucks.  I'm so very sorry that he put you in this position.  My only hope is that when you get your next (even more amazing) deal, you can start a forum post that says "I'm so happy that POS seller backed out"!  :)

Record the PA and cloud title. Sooner or later he’ll try to sale the property again and when he does title won’t be good than he’ll have no choice but to contact you for the release and when he does charge him a nice little fee for your headache!

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