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Old 12-11-2006, 11:17 AM
 
Location: in & around the Triangle
583 posts, read 2,606,317 times
Reputation: 263

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Any one have any advice for buyers who skip out on contracts days before closing?

Two days before closing our house, the buyer has gone 'flakey" according to her agent. The buyer went house shopping over the weekend and found a for sale by owner, who will finance her. Her friend left a message for her agent letting her know the details, and now she's MIA.

::h how I wish I knew which for sale by owner person is about to get into a really bad deal too:::

Of course I get the earnest money, but that's not much of a prize considering all the headaches of contracts back and forth with her over the last month and now having moved all the furniture out, etc.

This is the first house that we've ever tried to sale, and boy is this crazy!

Would it be worth sueing over? Any advice for recourse against this buyer or preventing this in the future?
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Old 12-11-2006, 11:21 AM
 
Location: Springfield, Missouri
2,814 posts, read 12,071,578 times
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Quote:
Originally Posted by erineieio View Post
Any one have any advice for buyers who skip out on contracts days before closing?

Two days before closing our house, the buyer has gone 'flakey" according to her agent. The buyer went house shopping over the weekend and found a for sale by owner, who will finance her. Her friend left a message for her agent letting her know the details, and now she's MIA.

::h how I wish I knew which for sale by owner person is about to get into a really bad deal too:::

Of course I get the earnest money, but that's not much of a prize considering all the headaches of contracts back and forth with her over the last month and now having moved all the furniture out, etc.

This is the first house that we've ever tried to sale, and boy is this crazy!

Would it be worth sueing over? Any advice for recourse against this buyer or preventing this in the future?
That happens and there's not much you can do. The earnest money is forfeited of course by the flakey buyer. You can sue, but you won't win as any buyer can back out before closing, that's why the earnest money is yours if the buyer backs out. There's just not much you can do, so I'd move on and be glad there was an earnest deposit.
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Old 12-11-2006, 12:09 PM
 
Location: Peoria, AZ
1,064 posts, read 2,349,698 times
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Quote:
Originally Posted by MoMark View Post
That happens and there's not much you can do. The earnest money is forfeited of course by the flakey buyer. You can sue, but you won't win as any buyer can back out before closing, that's why the earnest money is yours if the buyer backs out. There's just not much you can do, so I'd move on and be glad there was an earnest deposit.
I also think there is usually a liquidated damages clause too? Not sure but thats how it is here, which means that the earnest money IS the extent of the damages a buyer is liable for.

Next time, when you ask for an earnest deposit make it a substantial enough amount to be more preventative of a fallout maybe? It may risk the deal by being overly paranoid, but in the long run it might stop someone from going forward if they really aren't all that serious.
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Old 12-11-2006, 02:43 PM
 
30 posts, read 117,868 times
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Not much you can do, flaky buyers are definitely a problem. My only advice is to raise the amount of the earnest money.

Suing will probably get you nowhere, and the buyer actually has the right to back out of the contract.
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Old 12-11-2006, 03:30 PM
 
Location: Cary, NC
101 posts, read 514,055 times
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We had that ALMOST happen to us 2 weeks before our closing in NJ. Our buyers couldn't sell their house and although our contract was not contingent upon them selling, they tried to offer us the earnest money and walk away. I had already rented a house in NC, had the movers hired and everything. My realtor really helped us out. She immediately called the buyer's mortgage lender to confirm that they had the funds to buy our house without selling theirs and then she told me that we could sue them for the money on our rental lease, the mover's fee, the difference in price(if we had to lower it) to put our house back on the market to sell and a few other things. Not sure if what she said was exactly accurate, but it was enough to scare our buyers into going thru with the sale.

Needless to say, our closing was not a happy occasion.

Good luck and really check with your realtor and attorney before letting them walk away so quickly.

Taryn
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Old 12-11-2006, 06:38 PM
 
Location: Raleigh, NC
653 posts, read 2,764,711 times
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Default Option 2 Inspection Provision

There are many ways that a buyer can get out of a contract - cold feet isn't one of them. Inspections, failure to find financing (after diligently attempting to do so), or a contingency would all be legal reasons to void the contract and result in return of earnest money.

However, I always advise my buyers that the earnest money is not the only thing they stand to lose if they change their minds! In most cases, the sellers just chalk it up to a bad experience and move on because the process of suing for actual damages is more difficult than the payout would be.
In truth, though, as the pp posted said, the buyer may be liable for more than just the loss of their earnest money. Any expenses the seller incurred as a result of taking their home off the market, the potential loss due to the inability to purchase their next home, and oh yeah - the realtors' fees, too, since they also incurred damages due to the sale falling through. Again, what you're legally entitled to and what is worth fighting out in court may be two different things.

The same holds true for a seller who changes their mind at the last minute and refuses to sell. I personally know a realtor who brought a ready, willing, and able buyer to the table, and at the last minute, the sellers changed their minds. The realtor went after her fee and won. No, it wasn't me.

For any buyers who think that earnest money is all they stand to lose if they walk away in NC, think again. If, as a buyer, there is any chance you may change your mind, then the contract should be written using the "Option 2" inspection provision instead of the standard inspection clause. With Option 2, the buyer pays a deposit on top of the earnest money which buys the option to back out of the contract FOR ANY REASON by a certain date. During this time, the buyer can do any and all inspections, have his cousin's brother's friend look the place over, whatever. The seller takes the option money as payment for taking their home off the market for that period of time. If the sale closes, the option money and the earnest money are credited toward the purchase price of the house.

The difference between earnest money and option money: Earnest money is held in trust and can only be distributed if there is no dispute between the parties, either at closing or if both parties agree that the contract is void (say, an inspection turns up damage that exceeds the Cost of Repair Contingency and the seller agrees to return the earnest money.) However, if there is a dispute, even an unfounded one, the money is held in the trust account until the dispute is resolved, sometimes for years. Option money, on the other hand goes directly to the seller at the time of contract - the check is written to the seller, and the seller simply deducts it from the total due at closing. Or, the seller keeps it. Period.

This is a relatively new addition to the Offer to Purchase and Contract, but I expect that it will grow in popularity as people see it as an alternative to the standard inspection clause that is still one of the biggest causes of dispute.

*** I AM NOT A LAWYER! Please consult a lawyer if you want to take legal action against anyone. (I don't want to be sued for posting stuff on this forum, either! ) Oh, and I usually get paid for explaining this stuff.
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Old 12-11-2006, 07:10 PM
 
Location: Cornelius
2,314 posts, read 2,115,339 times
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While all the above is true that NCHomefinder posted with option 2 the buyer can also backout for something as stupid as the color of the carpet.

You can sue for specific performance but as already stated probably not even worth the hassle.

Hope everything works out for you!
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Old 12-12-2006, 04:03 PM
 
Location: in & around the Triangle
583 posts, read 2,606,317 times
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This is all great information and lots for us to think about! Thank you! Thank you!

As a follow-up, if the former-buyer refuses or is hard to get up with to sign the release from contract, do I still get the monies held in escrow or does that just stay in the realtors account until it's given up on or forgotten?

As far as option money, how hard is it to get the new potential buyer to get on board with that approach? Do you ask for option and earnest money both? What's a fair amount (percentage) to ask for. I want to make sure that the next buyer entering the contract is just as serious about this deal as we are!
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Old 12-12-2006, 04:37 PM
 
Location: Raleigh, NC
266 posts, read 958,795 times
Reputation: 202
Default So sorry!

This is the kind of thing that makes us all cringe. If you do sue this person, it will be very difficult for her to buy another house, but also difficult for you to sell yours. Mortgage companies and new potential buyers do not like lawsuits!
If the "buyer" does not sign a release for the earnest money it will be a little more difficult for you to get. Your realtor should have the name of an attorney to whom you can go for help. Of course, the buyer won't get it, either. It will just stay in escrow until a court decides where it is to go.
Option and earnest money are not the same. Options are seldom used as the money is not refunded to the buyer and is not credited to the buyer at closing. It is a fee they pay the seller to keep the property off the market while they investigate and think about whether they actually want it. If I am representing a buyer I may try to get the seller to accept a fairly low earnest deposit. I never them think the deal should be "easy to get out of", I just do not want to tie up too much of my buyer's money if I am representing them, as the check DOES get cashed. A normal earnest money deposit in our area is somewhere around 1% of the sales price or a little less. It can vary depending on the circumstances and price point. As a seller, you may ask for even more than that, but keep in mind, depending on your price point, some buyers may not be able to do that. Good luck!
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Old 12-12-2006, 04:52 PM
 
Location: Cary, NC
33,603 posts, read 58,292,483 times
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Oh...You won't get the earnest money until the "flakey buyer" signs off in agreement, or until the issue is settled legally. Lawyers. $$$
An MIA Buyer likely tilts the venue toward the Clerk of Courts.

Shake the dirt off your shoes and get on with life and selling your home. Don't waste time and energy chasing a "flakey" buyer.

Just my opinion, and I am NOT an attorney.
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