Here are the facts (a true story):
A Buyer signed a contract to purchase a Killeen Fort Hood property. Buyer asked for no termination option period. Buyer was fully approved by his local lender. Buyer tendered earnest money that was deposited with the closing agent. Lender appraisal was completed, termite inspection was completed, title work was completed and title commitment was issued. Survey was ordered and scheduled to be completed. All this work was done on the behalf of the buyer.
All this happened within a ten day window because buyer was so eager to close and move in to this Killeen area property. (By the way, this was a really beautiful home). Seller, in anticipation of closing, had MOVED OUT so buyer could move right in.
Yesterday, the buyer called his agent and told her "I'm not buying the house". His reason? He didn't really have one other than he changed his mind. And that's fine. No one should feel forced into buying a property.
But here's the deal: He asked for all his earnest money back.
Now, he signed a contract that says clearly that if the buyer fails to comply with this contract, the buyer will be in default, and the seller may sue him for specific performance (make him buy the house), seek other relief as may be provided by law, or both, or terminate the contract and receive the earnest money as liquidated damages, releasing both parties from the contract. It clearly says that in the contract he signed. Right there in black and white. I'm no attorney, though.
So what do you think? Should he get his earnest money back? Who should pay for all the work that was done in his behalf?
I can't wait to hear your comments!!
Hi! Mary Ann:
I read your post that is 3 month old. Maybe you have an answer already.
I am just wondering how come nobody responds to your post as mine.
My answer is this: Let it go as the buyer wants.
Why? Not fair.
1. There are all kinds of people. I had a buyer who changed her mind to buy a house. She wanted sellers to release her liability to the contract by offering to have all the earnest money she put into escrow confiscated. As a listing agent, I told her that she could use any of "escape clauses" to cancel the deal and have all her money back. It will just about 3 days to do that. No. she wanted to do it NOW and took the responsibility she made, willing to lose $5,000. What can I say? She lost that money when the contract was terminated. I respect her so much. Bear with those irrational principal, don't upset if you have one.
2. Okay, you will say that is not fair. I know it is, but the law doesn't have the same eyes as morality has. Yes, it is different from the above case I had, yours incurred so many costs and expenses. Who is going to pay? I don't know the details of your purchase contract. But, it is a general customary rule that who places an order pays. In case the escrow (in Texas, it is the title co.) places orders, then the escrow has to pay. But, the escrow can deduct those costs from the fund and ONLY refund the balance.
3. Yes, the law says you can ask a reckless seller or buyer do a specific performance. But is it practically realistic for you to go to a judge? I will say, "probably absolutely NOT." A lawsuit is a "Lis Penden" that will create a title "cloud" to make your seller's property "unmarketable." Your sellers don't want their property being tied up by a lawsuit for quite sometimes. Can they afford that? Unless your seller release your agent's liability in black and white, it is possible that you are going to be blamed for no sale or delaying of a sale.
To the extreme scenorio, you find a good buyer for your seller later and ready to close. Your seller may be forced to "beg" the other party of the lawsuit to settle by paying some extra money (in addition to his deposit). Or if the lawsuit takes two years to have a verdict to ask the buyer do specific performance, the buyer says he doesn't have money? Or the property appreciated a 20%, the loser turned out to be a winner by paying the previous agreed price to buy at a discount, assumed that no penality was given by a judge.
4. If the buyer will not accept the amount of refund paid by the escrow, it is his/ her turn to go to judge first. However, 9 out of 10 escrow officers don't want do that due to the fiduciary role an escrow is supposed to perform. As a person with fiduciary duty will take an action other than the original instruction, ONLY a new change or amendment of the escrow instruction is reached by both parties.
5. Our current laws are inefficient to solve the common situation like you have here. The law doesn't give us a clear-cut help here. This is a lesson out from my other case involved with a buyer of mine, an owner of Hilton Hotel.
6. What I am talking about here is my understanding on California real estate law. I know it is a more complicated purchase form used in Texas. At least, we don't have the "option" clause in the board form. So I am not sure my opinion will help you.
Ed