Earnest Money forfeiture.

[Keith L.]

Hello all, I'm asking this question on behalf of a friend. The seller is insisting that they will be keeping the Ernest money as well as suing for repairs they made to get the property in compliance with FHA standards.

So here's the story.... The company advertised the house as empty and newly rehabbed....upon walkthrough the home is dirty and damaged with a tenant. My friend signed the contract to purchase the home 

The closing date came and went without the owner having the repairs done. My friend then recanted the contract after she noticed weeks later the home still has a tenant.

Company did fix the required repairs per FHA guidelines after the closing date. So who's at fault my friend or the seller?

[Charlie MacPherson]

For all those who love to denigrate Realtors on this site, this is a prima facie example of why inexperienced buyers need a good agent.

If I were representing this buyer, I would have included the following in the contract (addendum):

Punch list of repairs that were to be made and completed in a workman-like fashion.

Deadline for repairs to be completed.

Inspection date to verify that repairs were done satisfactorily - carried out by a professional home inspector.

Property is to be delivered vacant and broom clean.

A final walk through on the day of closing to verify condition and that the property is vacant.

If it's not, a per diem charge and holdback of funds at closing, sufficient to cover cleaning and a contested eviction.

A provision that if either the repairs were not completed to the buyer's satisfaction and in the buyer's sole judgment, or if the tenant still occupied the house at closing, that the buyer has the right to terminate the agreement and receive a prompt refund of all deposits.

At this point, "fault" depends on the contract language.  If there was a deadline for repairs and it was missed, the seller is in default.  Likewise if the tenant was still occupying the premises at closing.

I'm not an attorney, but I suggest that your friend talk to one right away.  Unless the contract language allows it, it's not clear to me that the buyer even had the right to unilaterally cancel.  The usual remedy would be an extension of time if the parties were agreeable to it.  If they weren't, the buyer's attorney could threaten to sue for specific performance and place a lis pendens on the property (https://legal-dictionary.thefr...), preventing them from selling to anyone else.  That puts pressure on the seller to fulfill the terms of the contract as they're stacking up carrying costs until closing.

However, if there was no contract language allowing the buyer to cancel, it's probable that the buyer is in default and could be liable for damages.

Good luck!