Buyer using "Inspection Contingency" Clause to get out of deal after Attorney Review (disclosures, mortgage)
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I negotiated a offer on a home in NJ and the seller agreed and it went to and finished Attorney Review.
I had a change of heart about the purchase of the home, even after I was approved of the Mortgage from the Mortgage Company (so the lack of Mortgage acceptance contingency to get out of the deal is not an option at this point I guess, but I did not sign the Mortgage Loan Acceptance Paper work), my Attorney (referred to by my real estate agent), sent the message to the seller's attorney that I was withdrawing my offer.
The Seller and his/her Attorney responded that we need to move forward with the contract because the reason stated for the withdrawal on my part
was not valid in the contract, which the seller and attorney are correct on.
Both my attorney ( I am the buyer) and myself did not think the seller would return with interest in trying to get damages paid by us. We thought they would just drop the deal and move onto other buyers, but the home has been on the market for many years, so they are trying to hold onto me I guess because they might be afraid that nobody else is ever going to be this seriously interested in the home as I am.
By the way, I did not put a penny down to the owners of the home or send any money to them whatsoever (such as the Earnest Deposit etc.) We never got that far. So I don't have to worry about them threatening to keep any money of mine.
My Attorney then said that I just need to get an inspection and have the Inspector be very detail oriented and hold my ground with what changes I requested to be made that the inspector finds that "needs a cure or correct".
Here is the Inspection Clause word for word in the contract:
Responsibilities to Cure:
"If any defects, or environmental conditions (other than radon) are reported by the qualified inspectors within the inspection Time Period, the Seller shall have seven (7) calendar days after receipt of such reports to notify the Buyer in writing that the Seller shall correct or cure any of the defects set forth in such reports.If the Seller shall fail to notify Buyer of Seller's agreement to so cure and correct, such failure to so notify shall be deemed to be a refusal by Seller to cure or correct such defects. If Seller shall fail to agree to cure or correct such defects within said seven (7) day period, or if any part of the dwelling is found to be within a flood hazard area, or if the environmental condition at the property (other than Radon) is incurable and is of such significance as to unreasonably danger the health of the buyer, the buyer shall then have the right to void this contract by notifying the Seller with seven (7) calendar days thereafter. If Buyer shall fail to void this contract with the seven (7) day period, the Buyer shall have waived his right to cancel this contract and this contract shall remain in full force, and the Seller will be under no obligation to correct or cure any of the defects set forth in the inspections. If Seller shall agree to correct or cure such defects, all such repair work shall be completed by Seller prior to the closing of title."
The inspection was completed and we found numerous problems needing to be completely rebuilt, evidence of termites and a ton of other things (unfortunately). We are talking 100k plus in work...This was an old house that was never updated!!! There is no way that the seller will agree to all of the fixes that I will be requiring...
Will this "avenue" of using the Inspection Contingency Clause to get out of the deal work?
If not, what about having a crises with my financial situation such as "having to use up a major part" of the available money in the banks which would make the 50k deposit be unavailable and therefore disqualify for the loan (even thought I already qualified for it and the paper work was sent to me, but I never signed the Mortgage Loan Agreement Final Paperwork.
Can the seller and his attorney disagree with the inspection report or say that "I am being too greedy or outragious" with what defects I am requesting to "correct or cure"?
Thanks for the help!!!
Last edited by eternallightbeing; 12-22-2011 at 04:29 PM..
The seller and attorney can say whatever they want. It probably doesn't do you any favors that they have evidence of you trying to back out of the deal for a completely different reason.
That being said you certainly have the right to do what the contract says and that seems to include asking for repairs from the inspection. I'm not sure how on earth you got around putting any deposit down.
I negotiated a offer on a home in NJ and the seller agreed and it went to and finished Attorney Review.
I had a change of heart about the purchase of the home, even after I was approved of the Mortgage from the Mortgage Company (so the lack of Mortgage acceptance contingency to get out of the deal is not an option at this point I guess, but I did not sign the Mortgage Loan Acceptance Paper work), my Attorney (referred to by my real estate agent), sent the message to the seller's attorney that I was withdrawing my offer.
The seller and his attorney responded saying that they will sue for damages. The reason they said they would sue for damages had to do with the reason we chose to back out of the deal. The words that we used in the letter for the reason we were withdrawing the offer was because of the following...We told the seller and his attorney that "we found out that the home is in a flood zone which was not indicated in the original contract". But since I am the buyer, my attorney and I overlooked the contract, and indeed, the seller and his attorney were correct in that they did state clearly that the home is in a flood zone.
Both my attorney ( I am the buyer) and myself did not think the seller would return with interest in trying to get damages paid by us. We thought they would just drop the deal and move onto other buyers, but the home has been on the market for many years, so they are trying to hold onto me I guess because they might be afraid that nobody else is ever going to be this seriously interested in the home as I am.
By the way, I did not put a penny down to the owners of the home or send any money to them whatsoever (such as the Earnest Deposit etc.) We never got that far. So I don't have to worry about them threatening to keep any money of mine.
My Attorney then said that I just need to get an inspection and have the Inspector be very detail oriented and hold my ground with what changes I requested to be made that the inspector finds that "needs a cure or correct".
Here is the Inspection Clause word for word in the contract:
Responsibilities to Cure:
"If any defects, or environmental conditions (other than radon) are reported by the qualified inspectors within the inspection Time Period, the Seller shall have seven (7) calendar days after receipt of such reports to notify the Buyer in writing that the Seller shall correct or cure any of the defects set forth in such reports.If the Seller shall fail to notify Buyer of Seller's agreement to so cure and correct, such failure to so notify shall be deemed to be a refusal by Seller to cure or correct such defects. If Seller shall fail to agree to cure or correct such defects within said seven (7) day period, or if any part of the dwelling is found to be within a flood hazard area, or if the environmental condition at the property (other than Radon) is incurable and is of such significance as to unreasonably danger the health of the buyer, the buyer shall then have the right to void this contract by notifying the Seller with seven (7) calendar days thereafter. If Buyer shall fail to void this contract with the seven (7) day period, the Buyer shall have waived his right to cancel this contract and this contract shall remain in full force, and the Seller will be under no obligation to correct or cure any of the defects set forth in the inspections. If Seller shall agree to correct or cure such defects, all such repair work shall be completed by Seller prior to the closing of title."
The inspection was completed and we found numerous problems needing to be completely rebuilt, evidence of termites and a ton of other things (unfortunately). We are talking 100k plus in work...This was an old house that was never updated!!! There is no way that the seller will agree to all of the fixes that I will be requiring...
Will this "avenue" of using the Inspection Contingency Clause to get out of the deal work?
If not, what about having a crises with my financial situation such as "having to use up a major part" of the available money in the banks which would make the 50k deposit be unavailable and therefore disqualify for the loan (even thought I already qualified for it and the paper work was sent to me, but I never signed the Mortgage Loan Agreement Final Paperwork.
Can the seller and his attorney disagree with the inspection report or say that "I am being too greedy or outragious" with what defects I am requesting to "correct or cure"?
Thanks for the help!!!
You're asking legal questions and you have indicated that you already have an attorney. You should be asking your attorney these questions. However, maybe you should also make sure the bank gets a copy of the inspection report so they can see what the reported condition of the home is? Maybe the bank will yank the financing or impose additional down money requirements that you can't comply with? Maybe that would end the issue since your financing is now gone?? Of course you should discuss this with your attorney.
He is shopping for answer to back out but at least he admits he wants out do to based on a "change of heart". Stop encouraging him. He wants his cake and eat it also. He is already lawyered up. Let him man up and pay for his "change of heart".
Also if no upfront money, does this deal not have the faint odor of rotten fish from the get go?
Ask any lawyer that has been practicing in the real estate arena for more than a couple of years how many sellers threaten cold footed "buyers" with legal action VS how many actual bring suits.
The first thing one learns in even pre-law classes about contracts is that there has been to exchange of some kind of "adequate consideration" and generally that means earnest money. While an argument could certainly be made that no earnest money is needed IF there a bilateral agreement to waive other elements of the steps toward closing, that assumes that things like inspection and mortage approval are just formalities. The more of these steps that were waived the more wary the seller should have been that the buyer was not serious. The pitfall I see here is that it sounds like the seller did the proper disclosures and the buyer seems to have started down the path toward a sale and then gotten cold feet....
Even in the SPEEDIEST legal jurisdiction these kinds of lawsuits take a long time to get before a judge. Given that the seller seems to have had the property listed for a long time I would say time is kinda on their side.
Ask your attorney if you would be in a better position if you sketched out the reasons you believe you cannot be held to make good on your offer or just wait 'em out...
As other posters have said, ask your attorney about the clause. While many of us have our opinions as to what would qualify under the clause to get you out of the contract, you are asking for a legal interpretation as to the contract language.
Can you explain what you mean with "time is kinda on their side" with regards to this situation and the seller having the home on the market for many years?
I assume you mean that the sellers can wait forever because they don't care how long it takes to sell the home.
To let you know that maybe they are possibly interested in dropping it quickly, they have dropped the price numerous times significantly to its current sale price. I think the numerous price drops in their asking price shows that they want to get rid of it.
Thanks for the response Chet!!
Quote:
Originally Posted by chet everett
Even in the SPEEDIEST legal jurisdiction these kinds of lawsuits take a long time to get before a judge. Given that the seller seems to have had the property listed for a long time I would say time is kinda on their side.
Ask your attorney if you would be in a better position if you sketched out the reasons you believe you cannot be held to make good on your offer or just wait 'em out...
You have an attorney. Listen to his advice as he will be familiar with your contract.
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