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  1. #1
    Join Date
    Aug 2009
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    3

    Default Seller Trying to Back Out of Contract

    My question involves real estate located in the State of: Florida

    I am on R&R from IRAQ, my wife and I had been looking at a home on MLS for 3 months, made appointments to see one home we really liked. We made an offer and a contract was created at my offer price. We paid escrow, inspections, appraisals and everything was going well until the appraisal came in 7k lower than the offer price and of course the mortgage will only commit to the appraisal price. The realtor went back to the seller with the information and the next thing I recieved was a form to sign for cancellation of the contract and a message they are taking the home off the market. What makes this even more stressfull is that I am headed back to IRAQ in 2 days and the home we currently are renting in MD is packed up and ready to be moved to FL. We have pushed out several thousand dollars in moving and airfairs to move my wife and home. I at this point am refusing to sign the release even though they want to back out of the deal. I recieved another e-mail stating that the sellers need 24 hours to make a decision since they are attempting to purchase a home in Mississippi and wont know if they have the home until then. I think due to the failing market they never thought it would sell as quikly as it did since most homes in that same area have been listed for 6 and more months. Personally I dont care if they do not have a home purchased, I only care that the date of Aug 28th which is closing we will be purchasing this home. My wife has POA since I will be in IRAQ and I hate to leave her with all of this. I told the movers to move regardless and wife and kids to go to FL since we have relatives there.

    Questions:

    There is nothing worded for a contengency of the sellers being able to purchase a home or not on the sale. Obviously if they do not come to closing on the 28th then they will be in breach. I know I can get my escrow, however can I also get the funds for the inspections, appraisals, moving expenses and plane fares as well as pain and suffering since I am leaving this to my wife to deal with. I also do not feel that our realtor has been honest with us on this and knew more information then she was providing to us.
    Any suggestions will be appreciated.

  2. #2
    Join Date
    Aug 2009
    Location
    San Antonio, Texas
    Posts
    57

    Default Re: Seller Trying to Backout of Contract

    You aren't going to get "pain and suffering". You may get reasonable expenses.

    You don't have to sign anything.

    It seems strange that the house comes back at less value than the purchase price and the seller wants out and the buyer is holding on, though.

    Regardless, your best bet is likely to negotiate. If you can get something fair for your troubles, take it. Your wife will figure it out. Can't be as hard as being without you.

    Thanks for your service.

  3. #3
    Join Date
    Mar 2008
    Posts
    1,995

    Default Re: Seller Trying to Backout of Contract

    Since we can't see the "P&S" ( purchase & sales ) contract, it is difficult to definitively comment on all the legal aspects.

    Usually, there is a mortgage contingency clause for the "buyer", where if the buyer fails to obtain a mortgage, then, the contract can be rescinded. What you are saying is that an appraisal was made, it came in $7,000 lower than expected, and the bank therefore cannot provide a mortgage at the amount as requested.

    At this point, the buyer can back out of the contract if he and she chooses based on the standard contingency clause. What the standard contingency clause usually does not say is the seller has to lower the price to the appraised value.

    This situation has happend to me.

    I was the buyer of a property, and the P&S contract was signed for $162,000. The bank required a 25% down payment at the time, so I agreed to put down exactly that, and applied for a mortgage @75% of that amount, or $121,500.

    Unfortunately the appraisal came to only $160,000. This was back in the early 1980's, I was shocked, and in fact, similar properties had asking prices of $180,000 to $200,000. But because values were going up at 20% or more annually at the time, if the appraiser chose to use values of properties that closed 6 or more months before, the appraisal is going to be way off.

    Anyway, I was told the bank is not going to listen to arguments that the appraisal is wrong, and would look at alternative appraisals warily.

    My attorney advised me at that point that I can invoke the mortgage contingency and bow out, if that is my choice. The seller said in that case, he would take the property off the market since he can wait six months till market data catches up, and he can get even more. Apparently, this is what your seller is also doing.

    I asked my attorney what my options are.

    He said the bank only said that it would provide a mortgage only for $120,000, 75% of it's appraisal of $160,000. Technically I can bow out. But it does not mean I cannot increase my downpayment from the $40,500 as stated in the contract to $42,000, to make up for the lower appraisal.

    Since it was just another $1,500 out of my pocket, I had it, so I decided to go ahead.

    Since I was willing to come up with $42,000, and the bank was willing to lend $120,000 ( not the $121,500 requested ), I have fufilled my side of the contract, and the seller cannot unilaterally withdraw. He can only do that if I insisted the P&S contract be amended to the lower appraisal of $160,000. Putting it another way, since he is going to receive $162,000 at the closing, so there is NO LEGAL reason he can bow out.

    There are similarities in your case to mine, and it would appear that if you are willing to come up with the larger down payment, to make up for the lower appraisal, you can go forward and close on the deal if you wanted to.

    Alternatively, people in these cases have asked sellers, instead of lowering the price, to bridge the gap with some kind of seller financing, and allow the closing to go forward. In my case, if I didn't have the $1,500 handly, it would involve my asking the seller to take a note from me for the $1,500, and I would pay him back with interest over a period of time.

    But if your argument is that the home is worth $7,000 less, and you would only pay that, then the owner has a complete right to take the house off the market, since that was not the price he agreed to sell it at, according to the contract.

  4. #4
    Join Date
    Aug 2009
    Posts
    3

    Default Re: Seller Trying to Backout of Contract

    I advised the realtor that I would make the difference of 7k up from my end and the bank will still loan without an issue. What the real issue here is my rep/realtor held back information from me on the issue that the sellers want to make sure they have a home purchased before selling. Their rep even sent a cancellation of contract for me to sign which I am not. I feel that my realtor did not fully disclose information nor represent me in the manner she should have when she became aware of these issues.

    I think since the market is so bad they never thought it would sell and they were caught off guard. Since this is a business transaction I cannot allow emotions from the sellers to dictate actions from my end. I will be in IRAQ and will not be able to control circumstances as they occur this is what makes this a nitemare for my wife.

  5. #5
    Join Date
    Sep 2005
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    Behind a Desk
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    98,846

    Default Re: Seller Trying to Backout of Contract

    If there's no contingency releasing the sellers if they don't close on a new home, they remain bound by the contract. The question is raised of whether it's worth the time, cost and effort to litigate - your real estate agent may have seen the appraisal, heard the seller's request, and guessed that you would be more inclined to walk away than to take it to court. It's not so much a question of "holding back" - if it's not in the contract "it doesn't exist". You knew all the actual contingencies.

    Beyond your investment in trying to get to closing, the best available appraisal indicates that you've agreed to overpay for the property, diminishing any damages claim. Suing for specific performance may well get you into the house... in eight months, a year, more than a year... at at considerable cost. (Does your contract allow you to recover your attorney fees if the sellers breach?)

  6. #6
    Join Date
    Aug 2009
    Posts
    3

    Default Re: Seller Trying to Back Out of Contract

    Your point is well noted and I agree, is the action of taking the sellers to court worth the outcome. The contract does state that I can recover reasonable attorney fee's from the seller if they breach the contract.

  7. #7
    Join Date
    Mar 2008
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    1,995

    Default Re: Seller Trying to Backout of Contract

    Quote Quoting USNAVYMIKE
    View Post
    I advised the realtor that I would make the difference of 7k up from my end and the bank will still loan without an issue. What the real issue here is my rep/realtor held back information from me on the issue that the sellers want to make sure they have a home purchased before selling. Their rep even sent a cancellation of contract for me to sign which I am not. I feel that my realtor did not fully disclose information nor represent me in the manner she should have when she became aware of these issues.

    I think since the market is so bad they never thought it would sell and they were caught off guard. Since this is a business transaction I cannot allow emotions from the sellers to dictate actions from my end. I will be in IRAQ and will not be able to control circumstances as they occur this is what makes this a nitemare for my wife.

    Based on what you are saying here, then your situation was like mine, there is no LEGAL reason for the seller to back out of the contract, now, since he will be getting the exact amount as agreed to in the contract, and you are ready, able, and willing to close.

    If you like this particular house, and the seller's concern is to sign a contract on buying the other house, maybe you want to give them assurance that you'll give them some additional time, and the advantage of dealing with you is they got the sales side locked up.

    At this point, you may have spent money on fees already. such as inspection, application fees and so forth.

    I would suggest that you get yourself an attorney to sort things out in this P&S transaction, and if your not going to be around, and still want to close on it, give the attorney, or your wife, the power of attorney to sign papers for you.

    UPDATE:

    I just want to note that you can prevent the seller from selling the property to anyone else by doing a public filing a copy of your P&S Contract, and up here, in NY, it's called a "Vendee Lien". This is to put on the public record that this is the only valid P&S contract, and if the seller tried to sell it to someone else, the buyer does a "title search", the "vendee lien" will show up, and any other buyer will not be able to get clear title.

    I had a signed P&S contract with a seller once, it was a long story that I won't go into details, but he made noises that he was going to back out. My attorney filed the "vendee lien", notified his attorney, and his attorney realized immediately that he had him over a barrel.

    This is also useful tool if you start negotiating reimbursment of expenses. You will only lift the lien if you get paid, WHAT YOU WANT, and not before.

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