Q: We recently had a contract to sell our home to a cash buyer. He and his wife were allegedly inheriting a large sum of money, and their Realtor confirmed that she had seen the bank account statement confirming a "vast sum of money," reportedly well in excess of our contract price.
We closed our half of the deal and moved out of the home, only to discover that on their closing day one week later, no money could be produced. After a litany of alibis from them trying to explain what happened, we were forced to relist the home and sell it for substantially less money.
Of course, we have an attorney, but we have been told that the buyers' Realtor holds no liability, even though she could not produce written confirmation that the money was in the account, as stated.
A: Generally speaking, when a buyer defaults on a real estate contract, the seller has three alternatives:
Keep the earnest money deposit. I hope that you had a large deposit from the buyers. I generally recommend a deposit of no less than 5 percent — and often as high as 10 percent — of the contract purchase price.
File suit for damages. As you have indicated, if you ultimately sell the house for less than the original price, that is one element of your damages. You can also claim any additional mortgage payments, taxes and insurance that you had to pay after the day that the house was supposed to settle.
And if you have to get a higher-interest-rate mortgage as a result of the delay, that is also a measure of damages.
Sue for specific performance. This means that you ask the judge to force the buyer to complete the purchase. Obviously, this works only if the buyer really has money or the ability to get a mortgage loan.
Litigation is time consuming, expensive and always uncertain. Discuss the pros and cons of each remedy with your attorney, and make sure you understand your financial obligation involved with any litigation.
Do you have a complaint against the broker's agent? State law will control, but if that agent lied to you about the financial status of her clients, you clearly have the right to sue her or at least file a complaint with your state real estate commission. Of course, proving what she saw may be difficult.
Bottom line: In the real estate industry there is a concept called "buyer's remorse"— namely that many buyers change their mind after signing a binding real estate contract. That's why I always recommend that sellers get as large an earnest money deposit as possible. You want to make it financially difficult for the buyer to walk away.
benny@inman.com
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