01-10-2013 01:14 PM
We are sellers of a property that was orignially scheduled to close on 12/27. The buyers have been a nightmare to deal with...actually, it's likely more the lender and agent they're working with. We signed an extension to 1/4, found out that day that they wouldn't be able to close but showed up and signed all the paperwork on time. They requested an extension to 1/10 and now want until 1/15. The lender has issued a committment letter but has not released to closings.
This is a rental property that has now been vacant for near a month so we are having to cover all the carrying costs. I asked for a reduction of the subsidy (from $5100 to $4100), which they agreed to but with each extension addendum, I have also asked for a statement agreeing to release the Earnest deposit if they don't meet the date. They refuse to include this and all the contingencies have expired. The monies are being held by the buyers agent.
We now have two other offers to consider. Neither is anymore appealing financially but I've had it dealing with these people. We're leaning towards going after the Earnest and accepting one of the other offers. My question(s):
- I'm sure the buyers won't agree to release, so how do I do this?
- If it ends up in court, can I self represent to avoid legal fees?
- How likely is it that we'll get the money?
01-10-2013 02:27 PM
Let me first say that I am not an attorney and I highly suggest that you consult with one who practices in the state of Maryland. This I do know: at closing all sellers are required to sign an affadavit stating that there are no pending lawsuits or litigation. Without the signed affadavit, the title company will not issue title insurance and in most cases, the new buyer will not be able to close. Since it's very unlikely that your current buyer will sign the release and allow you to take the EMD (you can't force them to sign it and all parties to the contract must agree), I think it's safe to assume that they will pursue legal action to recoup their EMD if you decide to sell to another buyer. If the matter goes to court, the winning party can have their legal fees paid for by the other party. Read your contract in the "Default" paragraph to determine if this is accurate (I have no idea which contract you are using). Whether you have a winning chance or not, I don't know. Best thing to do is speak to an attorney.
01-11-2013 06:03 AM
It is actually in VA. I didn't think a/b the impact on a new contract.
It seems to me that an EMD is just short of a joke, or at least mostly impractical. All one has to do is object to it, even if there is no question that they are in the wrong. Just another example of the growing entitlement mentality in this country, I guess.
01-12-2013 06:14 AM
You really have three issues at hand:
1. Are you entitiled to the EMD?
2. How long will it take you to get the EMD if you are entitled to it?
3. Are you better off taking an alternative contract rather than pursuind the EMD?
While I'm also not an attorney I am fairly confident that the buyers would be in default if you failed to once again extend the settlement date. This would entitle you to the EMD
At the same time if they do not agree to forfeit it and a threatening letter from an attorney is not enough to scare them than you will have to engage in a more lengthy process to get the funds. You could try to offer them some concession by asking for only part of the EMD rather than the full amount and thereby also release them from the liability of a potential lawsuit, however they can still decide not to play ball.
The third question however, is the most important one to me. If you have a solid second offer it may in the end be better to sell the house and move on than go after the first buyers. Some other information that may be helpful is are you still living in the house? If you are than it might be more difficult to establish damages for the morgage payments you've made, but here you should really talk to an attorney. You should also get a better idea of how long it would take to bring the lawsuit against the defaulted buyer to court since time is valuable when trying to sell a house.
Also hone relevant detail which we have not discussed is the amount of the EMD. Is it a couple thousand dollars or a more significant sum in the tens of thousands?
01-14-2013 09:12 AM
We signed the second contract as a backup, subject to the closing/release of the original.
With each extension, we've added a statement agreeing to release the EMD if they do not make closing. Each time, they have countered by crossing it out. They claim they can make closing today but they are still in default and cannot close unless we sign the extension. We will not sign the counter. If they do not make it, we are pursuing the other contract as of 9:00 pm tonight.
The EMD is $2k and we are not living in the unit. It was a rental property and is now vacant. There was a $5100 subsidy and, when they asked for the second extension, we asked for a $1k reduction to cover our carrying costs. The response from their agent was "my clients don't understand -- they haven't done anything wrong". How is it that you can be in default on a contract, miss 3 closing dates, and think you haven't done anything wrong. We asked for an additional $500 reduction in the subsidy and the buyers agent told our agent that "karma" would come back to him, or something goofy like that.
I've never dealt with such a disrespectful group of people. At one point, we were sitting at the table for closing (buyer was not there), with the loan officer on speaker phone, telling him that we wanted the reduction in the subsidy. His repsponse was something like; "We may be able to assist with a lender credit but will need to get the higher rate through underwritting" -- how is it a lender "credit" if you're ultimately going to charge the buyer by raising his/her rate?
01-14-2013 09:19 AM
Thanks for the additional information. From the sound of it the loan officer seems to be the main culprit here and I can see how the buyers may feel that they have not done anything wrong if the lender is the one holding things up, and if they, in theory did everything the lender asked yet still got stuck in this situation. That having been said they are still contractually obligated to close on time and their choice of an ostensibly horrible lender is still the decision which got everyone where you are today.
All that having been said if the other contract is eqaul financially my thought is that you may be better off cutting your losses and moving forward with the other contract without going after the $2,000. In the grand scheme of things the amount of money is not substantive enough to potentially lose a decent contract over. I would however enourage you to talk to a title or real estate attorney about any other possibilities.
01-15-2013 06:37 AM
Time to move on and work with the other offer(s). If the lender is holding things up then the buyer needs to handle it or find another lender. The agent sounds like an idiot and is nothing more than another obstacle for you. Force their hand or dump the contract.You are entitled to the EMD, but it is probably not worth pursuing. Buyers are responsible for securing funds and closing on time, otherwise they will lose out. Sounds like you have been more than reasonable with extensions. Now it is time to work with a serious buyer and agent. Good luck!
01-15-2013 12:52 PM - edited 01-16-2013 06:24 AM
Sorry this is happening to you as the buyer contracted to an agreed closing. You said it may be an "example of the growing entitlement mentality in this country", but I think in a different way -- the Government & Fed are propping up residential RE by providing liquidity & low interest rates which some argue will result in blowback to taxpayers & future economy.
Noting that it is rental property, it is likely the buyer is first time & first home, while it's an investment & cash-out for you - - a difference in life and financial experience.
I also suppose at this (unknown) price range, the buyer is not working with a 1% real estate sales leader.
01-22-2013 05:54 AM
Any update on if you closed this time? I hope you did. I am not an attorney, but I deal with contracts everyday, including real estate. One contract form, which I believe is approved by NVAR states in there that time is of the essence in all dealings, for both the buyer and seller. If you have not done anything to impede the contract from going forward(I.e. not allowed an inspection, or appraisal when the buyer requested one, or moved the dates back) then I don't see why you could not keep the emd for the buyer being in default of contract.
Two things to consider:
1. Possible litigation by the buyer, and what your costs are. (seems to me like you have them, since you could have rented the property during the month.
2. If the backup contract buyers have moved on, and if you would have to re-list which may mean taking a price reduction, since some new buyers will wonder what happened to the first contract.