Seller backed out at closing!

Rachel Degennaro · 2018-04-20T17:52:25-07:00

I was in the process of buying what I was led to believe (by seller and listing agent) was a triplex, the top 2 units were rented and the bottom one was vacant, so I was going to live in bottom and continue renting the top 2. Seller accepted my offer and I went through the inspection, mortgage, appraisal, EVERYTHING (found out during the appraisal that the 3rd floor kitchen was never permitted so it could only be a 2 unit) so they had to remove the kitchen and tenant (tenant had not paid rent for past 2 months so he was trying to pawn her off on me, found that out during this as well)I had asked multiple times (When I put the offer in, during the inspection, a few weeks later and again last week for proof of rents paid and security deposit, estoppel, ECT and was told repeatedly they'd give me that info asap and never got anything except a poorly filled out estopple) and on the DAY OF CLOSING (today) we are all waiting on seller and his agent and after they were 15 mins late, we call the sellers agent and ask how much longer til they arrive and he says they're not coming the seller doesn't want to sell. I've already moved out of my rental and was staying with a friend for a few days til closing and now that's not happening. I am so upset, I've saved for years to do something like this, and now he just backs out because he didn't line up a place for himself to go and said he didn't know he had a second mortgage and wasn't going to be making as much money as he thought he would.I am going to sue him for damages, has anyone else ever gone through something like This? I can't believe this is happening.

Brandon Ingegneri

Rental Property Investor · Providence, RI · Member since 2015 · 1k+ posts · 594 votes

8y

I had a similar situation once. The seller wanted to renegotiate after we had the contract in place. We had to threaten to sue to perform. We ended up closing as scheduled.

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Schieler Mew

Member since 2018 · 3 posts · 0 votes

8y

When deciding to move forward with litigations, please take your own personal time into consideration and if filing will be advantageous to the end result that you hope to achieve. Pride and ego are a hell of a deterrent, and while I think that we can all agree here the seller is at fault make sure that you are pursuing legal advice for the right reasons and not just to get back at another human for making a mistake.

Cheers, good luck and best wishes!

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Bill B.

Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes

8y

@Jay Hinrichs

Mostly echoing Jay here.

I’ve only bought about a dozen properties so I’m not as experienced as a realtor, but I’ve never met a seller at any closing in Vegas or in MN.

I’ve also had about 6 of those properties where the person I was going to use to place my offer (sometimes the listing agent, sometimes a preferred contact.) had some $300-$350 bs paperwork fee and the second I said no thanks, they, “took care of it”.

Try not to let it keep you down. Hopefully you’ll find a better place or a better solution. Good luck.

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Terri Ring

Clovis, CA · Member since 2017 · 18 posts · 9 votes

8y

While it is possible that you might have avoided a bad purchase, I would be furious too. I can understand your pain. Part of the buying process is the dreaming about the possibilities of your future home. While many will choose to just move on from a similar situation. There are those who will sue. This will take time and money. You will need to decide if it will be worth it. I see you have received some great advice here. I do agree with those saying to take a break and let your anger subside. Then decide if it really is worth the effort to sue.

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Tom GimerBusiness Member

DMV · Member since 2017 · 3k+ posts · 3k+ votes

8y

Originally posted by @Roy N.:

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"

Thanks for the language lesson but my point was that it is the tenant, not the seller, making the statements in the estoppel letter.

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Account Closed

Lender · Tampa, FL · Member since 2014 · 543 posts · 168 votes

8y

Like I wrote earlier, I'd go for the seller's jugular! Don't let that Mike Foxtrot get away with it, at least take him to Small Claims Court!

Contracts are written for a reason, to ensure both parties do as agreed, and if one defaults, then the other need to be compensated for damages, etc.

I'd pull back for a few weeks while you prepare, letting him that think you're just going to walk away, like a beat dog with it's tail between it's legs, same as all the others he's likely done wrong in the past.

Then, when his guard is down, step back in the ring and hit him with a law suit! He won't be expecting it, a clean shot out of the blue that will ruin his day to say the least!

And when he sees you mean business, ready to fight and go the distance, there's always a good chance he'll simply settle at the first hearing when the court assigns a moderator to get the parties to negotiate a settlement.

He'll likely have his check book ready and will pay you for damages you can prove as well as for court costs you've incurred to that point.

I'll bet if you run some searches on him in advance, you'll find a history of him doing people wrong, walking away from contractual obligations and failure to pay.

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Michael Plante

Deland, FL · Member since 2017 · 2k+ posts · 1k+ votes

8y

personally I would count my blessings

For me this is a business. The tougher it is the less competition.

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Jonathan Bowen

Real Estate Broker · Stoughton, MA · Member since 2012 · 109 posts · 96 votes

8y

Am I reading this correctly? You still wanted to buy this property after being presented with multiple red flags? I can't believe the mortgage company was willing to lend on this! Sounds like 2004 to me... Don't you realize you just dodged a huge bullet? With that being said, you should be able to recoup your expenses.

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Autumn RankinPro Member

Rental Property Investor · Bandera, TX · Member since 2017 · 148 posts · 56 votes

8y

Real estate lawyer. Sometimes all it takes is a letter and they’ll pay you back

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Account Closed

Lender · Tampa, FL · Member since 2014 · 543 posts · 168 votes

8y

@Luiz Souza......BINGO!! I was thinking the same exact thing of Clouding Title! Go to the county courthouse, pay $14.50 and record something?

I had an attorney tell me once he's seen someone file a "Claim of Entitlement" just to block a title company from issuing clean title.

But what you write could be an option.

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Account Closed

Real Estate Agent · Richardson, TX · Member since 2014 · 511 posts · 161 votes

8y

@Rachel Degennaro It's a hard pill to swallow. No landlord wants to keep a building that is vacant so there's a good chance someone else offered him more money.

I suggest you just move on. Just 3 weeks ago I lost a 30K profit deal because the seller backed out and he went behind my back to sell the deal to someone else who offered him more money. It's a waste of time to deal with these kind of people, just focus on finding another deal.

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Asela H.

Lender · Fort Worth, TX · Member since 2017 · 27 posts · 8 votes

8y

This is a worst case scenario if I've ever seen one. I feel for you and I hope you're able to move forward without much delay and obtain a triplex property that is EXACTLY what the seller advertises. Wishing you the best of luck. I would definitely speak to an attorney to see what can be done.

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Marian Smith

Real Estate Investor · Williamson County, TX · Member since 2011 · 1k+ posts · 961 votes

8y

I agree with asking an attorney to send a demand letter...if your contract does not let the seller back out (realtor should have made sure the contract was enforceable). If the seller still doesnt perform and the lawyer wont agree to sue contingent on getting paid by the defaulting seller if he wins (not sure they work that way). At the very least small claims court. You are out a lot with inspection, appraisal, missed work to go to closing and rendering yourself homeless. Give your realtor a chance to help you, but if it comes to you filing in small claims I would ask the realtor for my fee back, then sue him too in small claims if he doesn’t refund. He has no papers to store as he did not help you successfully buy. ..he works on commission by his own choice. You should probably take everyones advice and not sue the seller for performance if the letter doesnt scare him into performing...it will cost way too much. There will be another deal and you will be more experienced when it arrives. But you were harmed and small claims court is inexpensive and a good education. Good luck.

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Phil G.

Real Estate Broker · MA · Member since 2013 · 361 posts · 297 votes

8y

I'm sure you're disappointed and under a lot of stress, given your housing situation, but it's important to keep a cool head. Sorry you have to go through it your first time out of the gate.

If you were my client, I would advise you, that if you wish to look for any recourse, that you seek competent legal advice from attorney in your jurisdiction before taking further action. You've gotten advice from many well meaning folks here, but most are not attorneys, myself included, haven't read your contract and don't know Pennsylvania law.

Clouding title is generally not a good idea without an attorney's input. For example, I always put a rider in P&S, when selling properties I own or have the attorney's I have representing my clients include, that allow the seller at their option to declare the seller's obligations to be null and void and may deem the buyer to be in default if the buyer makes an assignment or records the agreement with registry of deeds. Depending on the circumstances, it could also possibly create some legal liability for you.

Best of luck in your resolution of this, however it turns out.

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Ryan Carter

Investor · Bastrop, LA · Member since 2017 · 32 posts · 14 votes

8y

This same scenario happened to me on my first deal! Closing attorney took his time and buyer/seller agreement expired. The next day at closing, the seller decides to back out free and clear. I had to eat all of the cost! I let that hold me back 2 years before I attempted to purchase anything again, don’t make my same mistake! You live and you learn. Find another property.

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Tom GimerBusiness Member

DMV · Member since 2017 · 3k+ posts · 3k+ votes

8y

Originally posted by @Account Closed:

@Luiz Souza......BINGO!! I was thinking the same exact thing of Clouding Title! Go to the county courthouse, pay $14.50 and record something?

I had an attorney tell me once he's seen someone file a "Claim of Entitlement" just to block a title company from issuing clean title.

But what you write could be an option.

FL MORTGAGE BROKER: he not only gives bad advice regarding real estate agents and title insurers, but also how to handle disputes.

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Allan Szlafrok

Rental Property Investor · Long Island, NY · Member since 2015 · 490 posts · 301 votes

8y

I almost had this happen last week. The guy owned the building for 34 years and It had some sentimental value to him. The night before the closing he changed his mind. He had no legal recourse to do so and we served a TOE letter that night and reminded him that he would be liable for any damages I incurred. I also offered to let him out of the contract right there for a $50,000 break up fee. In the end he realized he didn’t want a lawsuit that he would 100% lose and we closed the next day. I feel like there’s a good chance your deal will close like this too.

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Collette Pridgen

Orlando, FL · Member since 2018 · 6 posts · 1 vote

8y

My company does have a $299 transaction fee for either buyer agreement or seller listing agreement, in addition to and regardless of the commission structure. It's basically an admin fee used to offset costs of signs & placement/removal, printing/scanning, driving, gas, office space, etc. We can choose to have our client (buyer or seller) pay this fee at closing or we (agent) can pay it from our commission if we want to give the client a "break" on fees. If I'm getting a healthy commission from a seller client, I probably won't charge the $299, I'll either eat it or deduct it from the cooperating broker's fee. I just make sure everyone knows there is this admin fee and who will be paying it.

My thought on this situation is if you paid an earnest money deposit you should get that back from the title company. Write down your costs associated with this learning experience and decide if it's worth it to retain an attorney ($5,000+) and pay their hourly fee ($150+) to go after someone who seems like a deadbeat anyway. Are you expecting a court to force the sale to go through? Do you want to be paid back the money you are out? You need to figure out what remedy you want. Getting a judgment from a court does not mean you get paid anything from the deadbeat. Maybe you can get a lien on the property so that if and when it does sell in the future you can get your money back as any liens will come up in the title search.

I can imagine how excited and hopeful you were to become an investor and even get to live in the unit too. Next time the inspection or appraisal comes back wrong don't be afraid to back out of the deal. I'm not sure about your state but in Florida as the buyer you have that right, during either the inspection period or financing/appraisal period. It seems like there were plenty of red flags and you should have been asking these questions long before getting to the closing table. Unfortunately, this is an expensive learning experience, but you did learn something. Do not make offers until you get all the paperwork you need to make sure the investment is sound and you can verify what the seller and his agent are telling you. A building you think is a 3-unit suddenly becomes a 2-unit - you're already losing money on this deal. If they were not cooperating on providing documents and records, etc., then you should never have made an offer - you should learn to listen to your women's intuition. Also, not sure why your agent didn't advise you better. IMO.

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Account Closed

Lender · Tampa, FL · Member since 2014 · 543 posts · 168 votes

8y

In Florida, the counties change the interest rate on judgments I believe yearly.

So what if you win in Small Claims Court in PA, and the defendant does not pay?

File whatever form PA has at the courthouse to record the certified judgment on county record for it to show up on the defendant's credit report

Also, the judgment will grow at the rate that the county has set for 2018. If its 10%, then it goes at that rate, which is better than a lot of mutual funds ! ha

If he doesn't pay and the 7 yr mark is coming up, consider recording it again (est. cost to record $15.00) and let it ride for another 7yrs @ 10% interest.

As a Mortgage Broker, I deal with helping borrowers satisfy judgments and when I a $10,000 judgment on credit, I look at the date it was recorded and calculate the actual TRUE amount owed to get a range and it's usually not pretty when its over 10 yrs old!

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David Michael

Developer · Closter, NJ · Member since 2016 · 392 posts · 109 votes

8y

Hello Rachel,

First of all I think you attorney dropped the ball. Although inexperience might have played a role here your attorney should have protected you . Your attorney should have sent a Time of the Essence Letter to the seller and his attorney . Here in NJ we give a max of 14 days. At the end of the 14 days if the seller doesn't close you get your deposit. I understand you would like the place but the seller breached the contract and you are entitled by the laws to find a way to close

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Steve Babiak

Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes

8y

So lots of answers here that lack awareness of some PA state specific laws; I am not an attorney but I can state some facts that might be beneficial to @Rachel Degennaro

For residential 1 to 4 unit properties, PA law requires that the seller provides the prospective buyer with a seller's disclosure document that complies with the PA Seller's Disclosure Law, BEFORE the buyer and seller "execute" (sign) an agreement of sale. Link below is what is to be included in the seller's disclosure statement in PA at a minimum.

https://www.pacode.com/secure/data/049/chapter35/s...

There are two items that have been posted here on this thread that maybe should have been disclosed under that law, but seem to not be accurately represented based upon what Rachel posted; those would be the number of legal units and the encumbrances. That unit where the tenant had to be removed - that seems to be an item in the seller's disclosure that was misrepresented because IMO it is a material defect that should have been disclosed under part 17 sub-part vi. That the borrower had a second mortgage - this also should be disclosed (indirectly) under part 17 sub-part iv. So pursuing this under the Seller's Disclosure Law might be worth considering.

That was just my $0.02 worth. Summoning @Chris K. and @John M. Erdek who are both attorneys in PA who might have some other opinions on this matter.

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Chris K.

Attorney · Nashville, TN · Member since 2015 · 1k+ posts · 1k+ votes

8y

@Rachel Degennaro

At this point, you should probably talk to a lawyer that can really spend the time to review your facts to see what options are available. One of the biggest decisions you have to make is whether you want to sue for specific performance. Based on the facts you wrote, it sounds like you may have a good basis to demand specific performance. Whether it is worth your money and time is a different matter.

You can also sue for monetary damages. But it’s one thing to get a judgment --- it’s another to collect on it. So you would need to do some research on that end as well.

If you decide to pursue legal action, you would obviously bring the kitchen sink to the buyer. This includes the RESDL claim that @Steve Babiak mentioned. Whether it's going to stick is another matter but there is nothing inherently inconsistent about seeking both specific performance and a RESDL claim.

In terms of magistrate versus Court of Common Pleas, nothing that happens at the magistrate court level really matters if the defendant will appeal the judgment to the Court of Common Pleas. Given that this seller has a lawyer, just note that getting a judgment at the magistrate level may mean little.

This has happened to me many times; both as an investor and as a lawyer. It's obviously infuriating at an emotional level. But you also can't have your emotions cloud your judgment.

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

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Seller backed out at closing!

Seller backed out at closing!

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