 What happens when the buyer backs out?
|  Dear
Steve,
You recently addressed what can happen when a seller tries
to cancel
a home-sale contract. But what if a buyer tries to cancel on the closing
date with no legitimate reason? Does the seller have a right to recoup money
spent?
-- Kim
 Dear
Kim,
It's much easier, as you've probably deduced, for a buyer to back
out of a contract than a seller. But if you lived up to your end of the signed
sales contract, there are many forms of potential redress for the time on the
market you lost while you awaited closing, not to mention other lost expenses.
There have been cases where sellers sued defaulting
buyers for "specific performance," whereupon courts ordered
the buyers to complete the purchases. But these cases are relatively
rare. More common are instances where sellers sue cold-footed buyers
for expenses and the profits they lost after they had to sell their
homes for less money than the first buyer's offer.
At
the very least, you should be able to walk away with the buyer's earnest money,
which was probably anywhere between 1 percent and 5 percent of the home's value. While
you say the buyers offered no legitimate excuse for canceling, there are several
legally defensible reasons for backing out. These include the inability to obtain
financing, a lender appraisal that's less than the agreed-upon purchase price,
repair issues that the buyer doesn't have the wherewithal to address, a title
search revealing undisclosed liens on the property and the discovery of inaccurate
property boundary lines or undisclosed easements to the property, among others.
Most often, only a real estate attorney or other qualified
attorney can determine if you have recourse. That's not to say that most issues
shouldn't have been clarified or addressed well before the actual closing day!
In the go-go days of the sellers' market, sellers
would usually accept such cancelations without forcing the buyers
to live up to their agreements, often without even keeping the earnest
money, because home prices were rising and several other buyers
were likely on the hook.
But I sense
you want to play hardball here. Many contracts these days call for dispute mediation
as a means of arriving at a settlement and here's hoping your contract was one
of them. The mediation route is certainly cheaper than court for both parties
and it's also a faster way to arrive at a compromise and let both parties get
on with their lives.
Unfortunately, the soft market of today finds thousands
of buyers attempting to flee from contracts. Some fear home values
will drop further and are staking their earnest money on it. Others
are caught up in a chain of circumstances where they can't sell
their old homes because buyers have canceled out on them. Or some
have simply found that ubiquitous BBD (bigger, better deal).
Here's hoping your situation gets favorably
resolved.
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