<p>My sister-in-law wants out of a signed contract, and there has been haggling over repairs, replacements, for weeks, which eventually the seller has agreed to do. The thing is, communication has not been good, and it appears to me, from some of the paperwork that she has shown me, that her attorney may not have put all of her repair requests in writing, but I am not sure of that. So while her punchlist had 10 items, some of them may have gotten “lost” and she is just mad as hell now.</p>
<p>Regardless, it is 2 weeks from anticipated closing date, and she is willing to lose her $1000. Is there a worse-case-scenario than this? Can her 50% down which is in an escrow get tied up?</p>
<p>Real estate contracts generally have a specific list of contingencies that can be used to terminate the contract without financial penalty. The contingencies gradually get removed as you go through steps towards the purchase/sale. Inspections contingencies often have a limit of a specific number of days or weeks to address issues. If the inspection shows issues, the buyer can back out of the deal without penalty. For example, I once backed out of real estate deal due to what I considered to be flawed repair of previous water damage, as reflected in inspection. Later that week, I received the full balance from escrow without any fees or losses. Her realtor should be able to confirm the specific details.</p>
<p>I’m not an attorney, but my understanding is that until she’s signed that big stack of papers at closing, she can back out at any point. I’ve heard of deals that fell apart literally hours before closing. Your SIL may lose some or all of the earnest money, but if she’s that unhappy, she may be willing to. </p>
<p>Has she asked her realtor? (x-posted with Data10)</p>
<p>ETA – I cannot imagine that they’d be able to keep 50% of the purchase price if she ends up not buying the house.</p>
<p>She is willing to forgo the $1000.
But the question is, can the seller go after more than the $1000 deposit? Can the rest of the escrow get attached in some way, or is that very specifically for closing?</p>
<p>It’s only the $1000 that is the earnest money, right?</p>
<p>And the large sum (50% of the down) paid into the escrow is not at risk?</p>
<p>Chocoholic, it depends on the contract and your state law. You mention “her attorney”. If she has an attorney (who actually represents HER and not the seller, lender, realtor or title company), then she needs to ask her or him if she can terminate the contract and at what cost. In some cases, the seller can sue for specific performance (requiring the buyer to specifically perform the contract - meaning buy the property). This is a no-brainer question for a real estate attorney who has access to the contracts and is licensed in the state.</p>
<p>She needs to go over her contract, but potentially she could lose her downpayment, or a large part of it. It won’t be $1000. It’s not the seller’s problem if your sister’s attorney didn’t include all repair requests. Another point is just because your sister put something down on the list doesn’t mean the seller is obligated to repair it.</p>
<p>I imagine it depends on the contract and relevant state laws. If the buyer defaults on the contract by termination when not allowed under the specified contingencies, the contract might list specific financial penalties, or he might be at risk of legal action. I wouldn’t assume that only the financial risk is the deposit.</p>
<p>Yes there was a home inspection, and based on that, she requested repairs via her own R.E. attorney.
The seller took an excessively long time to even return a response, and after many weeks is now agreeing to the most major repair.
From what she is saying, some items have simply been neglected in the seller’s attorney’s response, and she just wants out now, as over 5 weeks have gone by since initial contract.
She thinks that she has reasonable grounds to terminate if every request of hers is not being agreed to. These requests are all based on her home inspection report.</p>
<p>I really don’t understand why she is not asking her attorney these questions. That is why he is being paid. None of us have read her contract…and it’s all in the contract.</p>
<p>
</p>
<p>It’s irrelevant what she “thinks” is reasonable. What does the contract say? If the contract says she can terminate if every request is not agreed to, then that is what she can count on. If not, then no…again, what does her lawyer say?</p>
<p>I just spoke with her, and the lawyer says that they are going to respond once again with the 10 points of repair tomorrow, and ask for a 24 hours response to agree to fix everything. She sent me this paragraph from the contract “In the event the Buyer fails to close title in accordance with the contract, the Seller may then commence action for damages it has suffered, and, in such case, the deposit monies paid on account of the purchase price shall be applied against such damages.”</p>
<p>Yep, she needs to ask her attorney. It all depends upon the contract and state law, so nobody on CC can give you an answer, not even me, and I’m a RE attorney! It doesn’t matter that she thinks “she has reasonable grounds to terminate”. The contract will set out under what circumstances she can terminate and at what cost. She can look at the contract language herself and decipher whether under the strict terms of the contract she can terminate. But her attorney can take it further than contract language. For example, her attorney will know whether there is statutory law or case law that may help her case, or whether there has been a counter-offer requiring separate acceptance such that the contract is no longer in effect,… She needs to ask her attorney!!!</p>
<p>^^That is what she needs her attorney to do. To pay attention to her potential damages. We’ve only had 2 buyers outright renig and in one case we agreed because the whole thing felt shaky, in the other we recovered money. We had one case that went through where we restructured the deal, basically scrapping the original offer and asking the buyer and their representative to present a restructured offer which they were willing to do because they really did want the property. There are many ways to go about this but HER ATTORNEY needs to watch out for HER interests just as the sellers attorney will watch out for the sellers interests. If her attorney or real estate agent screwed up then she’s got a real problem.</p>
<p>Worst case scenario?
In my state, yes, the seller can go for more than the earnest deposit. In theory, a seller can claim significant lost profits if a house doesn’t sell. He has to re-list, and who knows how long it might be before another buyer comes up, and who knows what price he’ll get?
As a matter of practicality though, it has been my experience that if a potential buyer forfeits the deposit, the seller takes no further action.
I’m confident though that SIL’s atty can answer the questions far better than I could here.</p>
<p>Your sister needs to allow reasonable time for the seller to respond, even if it is not as fast as she wants. In NY state, the only way for me to get my escrow back, without seller’s agreement, would be to go to court. </p>
<p>We recently closed on an apartment in NY and we’ve wanted to back out because the seller was being very difficult. We’ve had everything ready by early Sep, but he didn’t want to set a closing date until his new apartment was ready (2 months later). The seller pushed the closing 30 days pass the the “on or about” date in the contract. Our lawyer told us that the seller was still within his rights, and if we’ve gone to court we probably would still lose our very large deposit.</p>
<p>I am not a lawyer, but I read our contract and every piece of addendum before I signed. The seller is not going let you have a pass because your lawyer forgot something.</p>
<p>OP–the section she sent you about the buyer cannot be looked at in isolation. There is likely language that comes before or after that section that provides better context. One must look at the entire document for the context. </p>
<p>Given the scenario you’ve presented, she asked for repairs and the seller agreed to only some of the repairs, a buyer would be able to void the contract in my state and receive all money back. I know you don’t live in my state, but I use this to illustrate how state laws vary tremendously. That is why she needs to do as others have suggested–ask her lawyer.</p>
<p>Just a thought - often real estate contracts have limits (actual dollar amounts) the seller is limited to spend toward repairs. If the contract has these limits, the seller is not obligated to spend more than the set amounts. Unless the contract has a clause which allows the buyer to opt out (and this is usually during the inspection period), the buyer has the option to: 1) accept the repairs made by the seller based on $ limits set in the contract or 2) pay the difference so all work is done. The repair clause will tell you everything you need to know.</p>
<p>Just because a buyer wants everything “fixed”, it doesn’t mean the buyer gets everything fixed. More often, the buyer has to pick and choose which items are most relevant, i.e., new septic system or new roof vs broken sprinkler head or leaking dishwasher gasket. In fact, a smart agent will guide a buyer to pick the most important items to be repaired and forget about the chump change items - it’s all about staying within the $ limits. </p>
<p>Does your SIL no longer want to buy the house because she is mad at the seller or does she truly dislike the house? If she loves the house and the major repair items are being taken care of, then perhaps she should stick it out a few more weeks, buy the house, and enjoy many happy years living in it. Her agent/attorney needs to help her reign in her emotions so she doesn’t miss out on a nice home for her and her family.</p>
<p>When we put our house under contract, we had disclosed that the ice maker in the wet bar didn’t work. The buyer had accepted our counter offer with that stipulation. After inspection, they noted certain things they wanted fixed, we negotiated a bit, then settled on a list and had all that stuff done. Not a whole lot, mainly the pool filter and some piddly other things. Right before closing, the buyer agent contacted ours and “demanded” we fix the ice maker. DH wouldn’t budge, saying it had been disclosed, they had signed off on the contract without ever mentioning it, blah blah. I was afraid the buyers would walk. DH said, “Are you serious? They’ve got $25K in earnest tied up here, they are NOT walking.” Of course he was right.</p>
<p>Is she really willing to walk away if a few minor things (I’m assuming they’re minor --) aren’t repaired? That would be cutting her nose to spite her face. Rarely is an RE deal completely smooth.</p>
<p>As everyone else has said, have their representative go over the contract. Unless they were paying cash for the transaction (no loans), there is usually always a loan contingency. Thus, a way to get out is to get the bank to deny the loan somehow.</p>