Thank you. As a loan officer I often spend time with buyers explaining this. They think they are immune since these types of suits don't happen that often. I normally have had problems when they use their Uncle Floyd as an attorney and he is a commercial litigator.

In addition to shopping for a gret home they need to spend time shopping for the right attorney.

Good post.

The New GAR contract puts the issue on performance on the back of the Buyer and truly provides the Seller with remedies for the Buyers inaction.  The problem I see with this strenghtening of the Sellers Position is that the public will lag behind informationally for a couple of years.  Meaning that many more will get burned, so Georgia Realtors who represent Buyers better get on top of the new GAR contract or your E&O providers are not going to be too happy.

Tim-

I had a buyer client who chaged their mind 1 week before closing for reallt no good reason.  Not only was her $1K at risk for earnest money , but the seller threatened to sue them.  It ended up costing them more money in the end, but settled out of court.

Amen!  Just because it can be long, arduous, and expensive to sue for specific performance, that doesn't mean a seller won't do it!  We owe it to our buyer clients to advise them of everything they can lose if they should 'choose' to end a contract.  I had a buyer who walked last summer two days before close.  He left his earnest money, paid for all repairs that had been made, survey, appraisal, inspections, and the seller's movers as they had already moved.  AND I didn't hesitate to tell him that he was lucky he was getting out without more recourse.

 Good post!!

Tim,  I just posted a blog detailing a transaction that I am currently dealing with...the same topic that you have covered here. You are correct, buyers do not know what they may ultimately face by backing out of a contract. My seller is a lawyer and he will sue for specific performance! I'm glad you posted about this subject as well!

Darryl, Thanks for your post on the same topic. You never know when the seller might be a lawyer like your client.  Contracts are serious business and everyone needs to treat them that way. 

I had a young man look at four homes with me. He said he could not decide between three of them, let's just write an offer on all three and see what happens. I had to gently explain that idea was okay as long as he was prepared to possibly own all three at once?

Buyers remorse is a serious issue and another reason why trying to push a sale is never a good idea! We know this, I'm preaching to the choir here. Good info

Carole,  Buyer's remorse is really serious.  Sometimes I find myself playing devil's advocate on a home just to make sure they know what they are doing and aren't sorry later.  I hate trying to extricate them from a contract when they jump too quickly. 

Tim that makes so much more sense! And I've started playing more of a role in financial issues. Mortgage and Home Buying don't really mix here, but, I've started asking a little bit more about their plans for a mortgage, whether they have money to put down. And advising them to please talk over all scenarios with the lenders they interview. I think consumers will get a lot out of your post here.

Good post, Tim.  In this crazy, overly litigious world, we have to advise our clients that trouble can be a'brewin if they crash without reason.   And honestly, as a listing agent, it's good to see that there's information out there to remind buyers that you're playing with people's lives...and even if you're willing to walk off from your earnest money, that might not be acceptable.

Good post, Tim.  I insert the following clause for my buyer clients in all contracts: 

"In the event of material default by the Buyer under the Agreement, Seller may, as Seller's sole option, declare a forfeiture of this Agreement and retain the Buyer's deposit as liquidated damages."

I would strongly recommend that a buyer considering the ramifications of backing out of a purchase agreement contact a licensed attorney for specific legal advice.  Most Realtors are not attorneys and should be recommending to the buyers that they contact an attorney for advice.

Tim - good post.  Right and to the point.  I'm amazed at how many buyers AND agents as you mention have no idea that a buyer can be sued for performance. 

Stefan,  You are so right about recommending that the buyer contact an attorney for advice when they are considering trying to get out of a contract. In my early days as an agent, a few times I  naively used to try to advise them on some things like that.  I now give no indication whatsoever that I might be able to get them out of the contract.  Many times it seems that buyers seem to expect that of us.  But I now see that it is foolish to go down that road.

We don't have earnest money. We have a 10% deposit when you sign a contract. The only way a buyer can get that money back is if they had a financing contingency and couldn't get financing or if it was a co-op and the co-op board rejects the buyer.

Even then it is not an automatic refund. The seller can say they didn't cooperate with the board and provide them with the required documents or in a timely manner. I always advise buyers that they might risk losing their deposit.

It works the other way too. I've seen sellers try to get out of a contract because the were offered more money.

Thsnks for the warning, Tim.  Have not had a problem with this yet, but forewarned is good.

Joan 

Tim,

Thanks for clarifying that issue.  A real estate contract can have vast, unexplained, and unanticipated financial and legal ramifications.

This is a good example of that.

Rob K. Blake
The Mortgage Insider

Great Post Tim!  I am glad you addressed this issue, and I certainly agree that we must be sure our clients are aware of this.

If you are representing the buyer -- you should advise them to seek legal advice. Most often, an attorney will add language to the contract stating that the amount of the deposit recieved to date shall be deemed liquidated damages and shall be the sole remedy in law and equity!

I work with buyers and sometimes no matter how I emphasize the importance of their contract, it seems to fall on deaf ears.....until it appears they may lose something material in value.  They then, for some reason, seem to perk up.

Questions, i was selling two of my properties to an investor. The contract had already expired and I gave him an additional 2 week extention on his closing date. 3 weeks later he told me he couldnt get approved because the value was not there. He is now asking for his earnst deposit back, do I legally have to return it to him if his contract expired and he didnt sign the extension I gave him.

Sandy,  You need to first read the contract to see what it says about your particular scenario.  Then you need to have an attorney advise you.  Most amendments are only enforceable when both parties sign them. 

I signed a contract with a builder in Atlanta.

After 24 hours I received my job termonation letter. Need less to say I am freaked out and sent an email to the seller agent to his official email address stating my concerns and inability of gathering downpayment money and probelms of making payments going forward. in 4 days.

I also made a stop payment on the check immediately and also never recieved any seller signed agreement document.(I recieved the document with my signature and the seller agent signature but, not the the actual seller contract document signed by any one from the company).

What are my options? The builder wants me to pay him the earnest money.(I requested my bank to stop payment on that check).

Please advice: I cannot afford to loose my money in light of my job(Job terminated) situation.

Unfortunate Buyer,  I can't be certain of anything without having the contract in front of me.  You might want to consult an attorney to get their advice.

I would assume that you had a financing contingency clause in there.  If so, I wouldn't think that you would qualify for the loan now.

Send me an email and I'll send you a neme of an attorney to talk to.

It states that:

"If, due to no fault of Buyer, the loan is not finally approved subject only to completion of the property, within fifteen (15) days of the acceptance date, Seller may terminate this agreement and refund all earnest money to buyer. Upon termination as provided herin, the parties shall have no further rights or abligations hereunder."

I sent the builder management copy of my termination letter already. 

Note: thank you for the info.

I can't see how you would get approved for a loan without a job.  Unless it is a no doc, no verification loan.  When you show up at the closing, you usually have to sign something that says your financial situation hasn't substantially changed.  If it has, you don't get the loan.  So just make sure this is done within fifteen days of acceptance.  I'll send you an email with a name of a good real esate attorney tomorrow.

I appreciate the help.

Dear Tim, I am located in GA and have a contract with a seller that is a financial institution. The addenda states " closing is on or before 10/05" and I chose 09/26 for the closing. I have made all necessary arragements to close and paid for appraisal and inspection and obtained financing. Closing however did not happen because the seller was unable to provide any kind of title and has not communicated a specific or valid reason for their inability to provide the title. The lease on my apartment expires 09/30 and I was hoping to close on the specified closing date and move by 09/29. The seller will not cover additional rent and penalties because the addenda states “seller not responsible for consequential costs….” e.t.c. There's no certainty that closing will occur on 10/05 and I run the risk of losing all the money and time spent on this property including extra costs of extending my lease and buying a new property! What should I do? What legal recourse do I have? Please help! Thank you DESPERATE AND OUT OF A HOME

Toney,

You need to talk with a good real estate attorney.

Please give Larry Feldman, at 770-393-4757, a call and tell him that Tim said that you need his help. He'll probably need a copy of the contract.

Tim,

I recently made an offer on a home with $3,500 earnest money. The offer was eventually accepted. The contract addendum stated that I could have an inspection done and request major repairs. We also completed an addendum which noted we request time to have an estimate on the exterior of the home as damage was noted. The addendum stated the estimate must be an acceptable amount. The sellers informed us that their estimate was $15,000. We received two estimates one for $32,000 and one for $24,000. Niether of which was acceptable to us. The damage was noted extensively by the inspector. We requested the seller treat the termites, replace the electric box and requested $28,000 to repair/replace the exterior. The seller agreed to treat the termites and replace the electric box but refused our request for the exterior of 28,000. Our hope was they would at least agree to pay for half of the $28,000. We released their contract as they did not agree to our request nor was the estimate an acceptable amount. They are now refusing to give our earnest money back. My realtor is baffled and I am furious. I spent a great deal of time and money having estimates, appraisals,inspections, radon test, basement analysis to the tune of nearly $1,000. I realize I can't recoup that money but to have the seller refuse to return my earnest money? The sellers feel they have met and agreed to the requests and repairs and that they are entitled to the earnest money. Please advise....