Buyer did not negotiate in good faith

15 Replies

WE rehabbed a property in Wilmington, DE and put on market after 2 months. We signed a contract for $5000 under asking price and was set to close with in 30 days. Their inspection came back with items for us to repair, including suspecting of termite, heater was operating but making noise and there are signs of rust, along with some more minor items. We came back with $3000 credit and we will take care of the termite. They will have a 1 year house warranty. They came back with they want us to release the contract and give deposit back, without giving us the chance to fix the items from inspection report. I think we have the right to sue for damages since we already declined 15 showings after we signed contract with them, and those potential buyers would have negotiate in good faith. We are not giving back deposit money but is it worth pursuing damages? Thank you all for your insight.  

I don't know what your contracts say in PA but here the inspection report & any issues are reasonable grounds to terminate the contract, regardless of whether you want to have the ability to fix those items, make concessions or anything else. I think you owe them back their earnest money, and if you don't sign I suspect they'll prevail against you in court and you will owe damages besides. 

In my market, our agents don't stop showing homes until the check changes hands. They usually talk with the selling agent before hand, and will know if this one is a done deal or not, but if you were that early in an offer and didn't show it to 15 people, that's really your own (or your agent's) fault. 

how do you put a value on the damages and even more so how do you show they are actually worth the value you came up with?

@Mike Dinh  

As @JD Martin touched on the answer to whether or not you even have anything to pursue should be spelled out clearly in the wording of your contract. I'm not so sure from your post that the buyers violated it. Frustrating, yes, but breach of contract? Possibly not. Even if they did good luck placing a monetary value on it that you will actually be able to collect on. Get it re-listed and find another buyer. 

@Mike Dinh looks like they DID give you the chance to fix the inspection items. You chose to counter with $3000 concession and you'll fix the termite problem. They rejected your counter and terminated the contract. That would be within their rights here in AZ; not sure what DE customs are.

Be very careful in negotiating. There is no guarantee you can roll back to the previous terms.

@Mike Dinh I'm going to gues you re fairly new this, or a little misinformed.  A assuming your buyers had a typical inspection contingency, which it sounds like otherwise you' shave no need to negotiate, the buyers can unilaterally back out without the need for further negotiations, let alone you didn't offer to fix the issuues, it issue a credits instead.  Just because you don't think the negotiations went as they should doesn't mean you get to keep the EM, let alone the idea of recovering "damages". I believe you are headed for problems.  I'm guessing your agent, if you have one, has already told you this.

Did you CHANGE the contract? If so, the contract is null and void if they did not agree to and sign your counter offer.
Also, if they have an inspection contingency, if they want to pull out before the end of that time frame and give proper notice, you have no claim to the EMD.

Also--if you changed the contract and submitted it for their acceptance, the original contract before the changes were made is null and void. You cannot say "never mind" and attempt to hold them to the original contract (because it is NO LONGER what they originally signed.

@Mike Dinh - I invest in Wilmington as well. Doesn't sound to me like the buyer did anything wrong, just unfortunately your property wasn't for them. Get the property back on the market and start looking for your next buyer!

I would suggest fixing the termite issue and putting it back on the market ASAP. Since you turned down showings there should still be a lot of interest in the property.

That's why you should have ordered your own inspection and fixed any issues then. Some buyers freak out over minor issues so best to handle those before even putting up for sale.

isn't this what back up offers are for? 

Looks like the buyer, had an out and took it. I do not see a way to keep EMD.

I have made offers with a contingency that I would need to gain entrance and inspect the house.  After a walk through, I have decided to rescind offer or lower my offer.  

Look at this as a learning experience and move on. Release the EMD and continue showing. If the house is priced right it will sell.

Originally posted by @Wayne Brooks :

@Mike Dinh I'm going to gues you re fairly new this, or a little misinformed.  A assuming your buyers had a typical inspection contingency, which it sounds like otherwise you' shave no need to negotiate, the buyers can unilaterally back out without the need for further negotiations, let alone you didn't offer to fix the issuues, it issue a credits instead.  Just because you don't think the negotiations went as they should doesn't mean you get to keep the EM, let alone the idea of recovering "damages". I believe you are headed for problems.  I'm guessing your agent, if you have one, has already told you this.

Yep. Pretty simple really, if you understand how contracts work. Buyer requested something pursuant to an inspection contingency; owner rejected and countered; buyer said "no thanks". Deal is dead, buyer gets EMD back.

This is a common scenario; Same comments as JD. Sign release, return deposit and get those 15 showings re-set up and move forward. 

@Mike Dinh if the buyer has a competent attorney or real estate agent, they can make your life a living hell. Give back the deposit money, put it back on the market. If there is as much demand as you say there is, it shouldn't be a problem to get another buyer. It may be hard, but as an investor, your personal feelings need to be separated from what is best for your investment.

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