What's the worst that can happen if I pull out of this deal??
I'm moving to Florida with my wife & baby daughter.
The market has been crazy. We really wanted a HOUSE with a backyard, but couldn't find one in our price range, so we made an offer on an APARTMENT instead.
Our offer got accepted. We did our inspection (which went fine). We waited several weeks for HOA approval. And today we finally got the approval! The tenant in the apartment is packing up to leave, and the closing is supposed to be in 6 days from today!
PLOT TWIST: TODAY we finally found a HOUSE, with a backyard, exactly where we want to be, next to a beautiful park with a lake and a playground for the baby! OMG.
The house is significantly better for our family and also it's a much better investment than the apartment. We just put an offer on the house and the seller said he will sign it tomorrow!!!
I want to pull out of the apartment deal and take the house instead, but I'm afraid the apartment seller will be angry and sue us.
I am assuming that the apartment seller (and his broker) will be PISSED that we wasted like 3 weeks of their time, they even fixed a bunch of little problems in the apartment, the tenant is moving out (though I think she will probably stay if we tell them that we're pulling out), etc. I know they're entitled to keep our $5,000 deposit, and I'm OK with that... as long as they don't SUE US and try to FORCE US to buy the apartment, when we already are buying the house.
Can they do that??? Would they do that??? What happens if we buy the house and they try to force us to buy the apartment?
Here's the language in the accepted offer (for the apartment, from which we want to pull out):
This should be a real estate agent question. In Utah, they can sue you to perform on the contract.
I hope it works out for you.
#3 Managing Your Property Contributor
Talk to your realtor and have them talk to the seller. Tell them they can keep the $5K. Do you have the money to buy the apartment and use it as a rental (assuming the HOA allows it)?
Thank you for your replies!
We have the money to close NOW... but if we buy the house, then no, we will NOT have the money to buy the apartment as well.
What would happen if we did that... if we bought the house, and then we simply did not have the money to buy the apartment?
If we tell them we don't have the money anymore... will they still try to sue us to buy the apartment? And what would happen if they did?
Quote from @Chris Horlacher:
Yes, that contract allows them to seek specific performance (make you close). The overwhelming majority of the time sellers just take the deposit and allow buyers out - especially if there is financing. Unsure if 5K is a large or small deposit based on purchase price. That being said, I have threatened specific performance a number of times and filed suit for same based on the very same contract you are using.
I hope it works out for you.
Have you sued for performance against buyers? And have you ever been successful?
I've asked attorneys about suing buyers for performance over the years and no one has ever seen it (in Utah).
It doesn't make sense from a cost benefit standpoint, because the buyer may not be capable of buying the property which is now unsellable to anyone else because of a protracted legal situation. In short, it's very expensive and a lot of risk for the seller. This property would have to be completely unsellable at any price to anyone else on earth for it to be a reasonable case to pursue.
However, the I would think that the seller could probably also sue for actual damages which they would need to demonstrate. This could include cost of time on market and the difference in sales price if they had to sell it for less than your contract price. Again, the damages have to be pretty great for this to make sense. Or, if damages are only a few thousand, they may be able to pursue you in small claims up to that limit. But for large damages, they have to be very confident that they would prevail and the damages would have to be much more than associated legal fees to make it a good bet. I've been told that damages between $10K and $100K are the hardest because they are too big for small claims and too small to justify the legal fees and risk.
@Archer Stone You should definitely review the specifics of the transaction with a Florida attorney like Chris who will have a better sense of case law etc.
thank you for your thoughts on this.
I should mention: the apartment deal is for $150,000. I made them an all cash offer and sent proof of funds. So they do know that I have the money to buy it. Do you think this makes a difference in the likelihood that they will sue?
@Archer Stone this market is so hot I would think they would just find another buyer but obviously that is not what the contract states
@Archer Stone In Florida, they buyers can either take your deposit as liquidated damages for you failing to complete the sale, or sue you to complete the purchase. That is their only options with the Florida sales contract. Having been a seller in FL where the buyer walked (the day of closing), I decided to keep the deposit, as they were not willing to purchase, so that was pointless to file suit. I would request the seller accept your deposit as liquidated damages per the contract and have them agree to cancel the contract. Once they accept to cancel the contract, you contact the escrow company and release the deposit to them and move on.
@Archer Stone - Maybe offer $5K (let them keep the earnest money) and in addition offer to pay damages to see if they'll accept that to walk away. The sellers definitely have been financially damaged by fixing things, time spent, loss of other buyers while locked up, etc. Try to make them whole and maybe they'll accept.
Update on what happened, in case anyone's interested:
The co-op owner TOLD us that he fixed the issues, and had us drive down all the way from NY to FL. When we walked through, we saw that the problems were NOT actually fixed. We are now spending a lot of money on AirBnBs because of this and consider ourselves to be the damaged party. We told the seller this was not acceptable, and finally signed a "cancelation and release" and received our deposit back.
Crazy times. Stressful, not fun, but I'm glad we were able to get out of it without too much damage.
In the meantime, we had canceled our offer on the house (because we were worried we couldn't get out of the co-op deal), and now the house is gone as well.
We have $150k in cash, but no access to mortgage/financing.
If anyone knows a decent place we can get in St Pete (ideally 2br), please let me know!
Have your agent make sure you are the backup buyer if the purchase of the house falls through. If you haven't already, explain you only walked away because you didn't want to hold up the sale of their house if you weren't going to be able to buy it.