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When home sellers lie

When I bought my house, the seller lied. He promised in the purchase contract to replace or fix some things -- a chipped bathroom sink, a rotten board on a gable, a leaky bathroom faucet. An hour before closing, during the final walk-through, I discovered that he hadn't made the repairs. He hadn't even started.

A lot of home sellers break the promises they make on binding legal contracts. There are a number of ways to deal with sellers who welsh on their contractual obligations to replace or fix things:

  • shrug it off;

  • have the seller reimburse the buyer at closing;

  • extract a promise that the seller will make the repairs soon after closing;

  • set up an escrow account, funded by the seller, to pay for the work;

  • postpone the closing until the work is done;

  • sue.

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It seldom goes as far as the last option. "I think most people tend to cooperate at the end of the day," says Neil Garfinkel, a partner with the Abrams Garfinkel Margolis Bergson law firm in New York. He specializes in real estate law. "Sellers want to leave with a good feeling and buyers want to leave with a good feeling. I don't believe that a real estate transaction should be adversarial."

That was the opinion of our attorney (he wasn't Garfinkel) when my wife and I closed on our house in Jupiter, Fla., on New Year's Eve 1999. All our attorney wanted was peace. But he was prepared to drop the bomb. He knew that our seller had scheduled back-to-back closings: the sale of his house to my wife and me, and then his purchase of a new house. A postponement of just two days might possibly blow apart his home purchase, and would crater everyone's homestead tax exemption.

Under this pressure, the seller wrote us a personal check that more than paid for the repairs. The closing took an hour longer than expected because of the time we spent negotiating the amount of the check, but we closed on the scheduled day.

Transferring money from seller to buyer is a common solution to the broken-promise problem, Garfinkel says. The seller doesn't have to write a check, and instead can give a credit against the buyer's closing costs. Usually, the agreed-upon amount "is a guesstimate," Garfinkel says. "But I've been doing this 15 years, and I think we've been pretty on the money when I've had a client guesstimate that it will cost X amount of dollars."

Sometimes an amount can be agreed upon at closing, and sometimes the closing has to be postponed. As Garfinkel puts it: "They fight it out outside the table, when cooler heads prevail, and try to come back and do it another day."

When the two parties can't set a price, but can agree on a range, the seller can put an agreed-upon sum in an escrow account. When the repairs are made, the contractors are either paid directly from escrow, or the buyer pays the contractors and then is reimbursed from the escrow account.

Lawyers generally prefer not to go the escrow route because it's unwieldy and time-consuming. Angry buyers and sellers sometimes hold up the escrow money out of spite. Garfinkel remembers a time when money was trapped in escrow for months because the buyer and seller were bickering over a crystal newel post. That's the bottom post of a bannister, and feuding over one is as low as some sellers and buyers will descend in a dispute.

 

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-- Posted: Feb. 17, 2005
     

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