real estate

Buyer reneges? Grab the deposit

Steve McLindenq_v2.gifDear Real Estate Adviser,
The buyer of my mother's house says she can't find the number to her Swiss bank account and therefore, short of traveling to Switzerland to identify herself, can't buy the house. Closing was to be in a few weeks and we do have a signed sale agreement with her. What recourse do we have?
-- Amy

a_v2.gifDear Amy,
That's a new one on me! While there are cases where account holders or heirs can't produce the number of a Swiss account to claim its contents, these instances can usually be remedied by sending thorough documentation to the bank clearly demonstrating entitlement. In a worst-case scenario, it's conceivable a person might have to trek all the way to Switzerland to claim his or her money, but that's pretty unlikely. The buyer here may have simply gotten cold feet and tried to concoct an excuse with at least as many holes as, well, Swiss cheese.

As an FYI, there are no truly anonymous Swiss accounts these days, despite what spy movies have us believe. The identity of those people who open Swiss accounts under a number instead of a name, also called "pseudonym" or "secret" accounts, are always known to the Swiss bank's manager and a few select other individuals. That was apparent when the IRS compelled the Swiss government recently to force one of its major banks to turn over the names of 4,450 Americans believed to be hiding $18 billion in such accounts.

Now for your recourse: Typically, a buyer backs out of home purchases not only for failure to qualify for financing or inability to sell his or her existing home but also for the failure of the sellers to disclose property flaws or to meet the terms of agreed-upon repairs/improvements. A buyer might also back out for such things as code violations and hidden termite infestations. More specific contract language can spell out additional conditions. These apparently aren't issues in your case, although you (or your attorney) would be well-served to examine that contract carefully.

The buyer's nonperformance in your case could entitle your mother to keep the buyer's earnest money. It also could conceivably allow her to file a suit for monetary damages or request that the court order the woman to buy the property. The latter ruling, however, is rare and difficult to enforce. Your "Swiss Miss" buyer might counter by arguing that her access to funds was frozen. Then your mother might be hard-pressed to prove otherwise, due to the privacy and nondisclosure practices of Swiss banks.

Your mom does have a good shot, it seems, at keeping the earnest money backed by the buyer's apparent contractual default. In many states, a mediation hearing previously agreed to in the sales contract would occur to settle that issue. A lawsuit, needless to say, could be quite expensive and delay your mother's ability to sell her home in a timely manner.

Good luck!

To ask a question of the Real Estate Adviser, go to the "Ask the Experts" page, and select "Buying, selling a home" as the topic. Read more Real Estate Adviser columns and more stories about mortgages.

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