Real Estate Q - Buyer Backs Out For No Reason *UPDATE*

[Vic]

Originally posted by: JulesMaximus
They didn't sign loan documents. He said they just signed the deal. Signing loan docs is done about a week before you close escrow.

Don't listen to half the BS you read here. Talk to your realtor. They should know the laws and be able to advise you what you can and cannot do.

I didn't say they signed any loan documents. I did say that I added that information about loan documents as an OT FYI. Try working on your reading comprehension skills.

What the prospective buyers did sign is a Purchase Agreement, and they did give Murpheeee an earnest money deposit (he said $1,500). I did say that buyers could back out, but that Murpheeee should be able to keep the deposit.

And as a licensed mortgage broker for the past 9 years, I think I know just what the fsck I am talking about here. And I did advise that he talk to his realtor and/or attorney for details pertaining to his state.

Learn to read. Good day.

 

[alkemyst]

Originally posted by: LunarRay

Originally posted by: CPA
Nope. Even if they put the earnest money down, they usually get 10 days to inspect the house and can back out for any reason.

I don't agree. The 'cooling off period' does not relate to Real Property. So long as the terms of the contract do not provide for this 'backing out' I'd say the buyer is in breach . A contract is not voidable unless its terms provide for the condition. For instance, can't get financing. The Agent earns his commission as well. IMO

Not true usually the main time cooling off works really is with real estate.

 

[Murpheeee]

Originally posted by: JulesMaximus
Yes, it will vary by state. You generally don't have attorneys involved in real estate transactions (not for personal property anyway). Your realtor should know what the laws are in this respect though. This is pretty clear cut and not subject to legal battling in the courts. At least not in CA.

I just got off the phone with my wife and this is law in CA. 17 days, buyer can back out for ANY reason or NO reason at all. If your realtor doesn't know the laws they shouldn't be selling real estate.

I have bought 3 houses and sold 2 in NJ and NY states.
I have worked with 3 realtors and one them had more than a basic understanding of real estate law....it's not their job.
Lawyers were used by all parties all through transaction and closing.

 

[HomeBrewerDude]

are you out anything? did you turn away any prospective buyers? i would be irritated too, but I don't think I would keep their earnest money unless I was out something.

 

[JulesMaximus]

Originally posted by: bernse

Originally posted by: JulesMaximus
This is not a legal issue if the law states you can back out within a certain amount of time. He just may have to accept that fact and move on.

Even so, it would still be very unwise to take the word of a real estate agent that is looking out for their best interests.

"Yeah. Let it go. Lookee here! Here is another prospective purchaser! Let's get this one. It'll be less work for me!"

I guess I have more faith in real estate agents than you do. I just happen to know this because my wife sells real estate and I've heard her complain about this law. The client is her number one priority. She gets more clients because she is very knowledgeable and she takes care to make sure the deals are done properly and in her client's best interest. Trouble is most people put about as much thought into selecting a real estate agent as they do what they are ordering for lunch.

Bottom line is this: Find out what the laws are in NY because they do vary by state. Your realtor may be right and you may just have to find another buyer.

 

[ExplodingBoy]

To the original poster, even if it turns out technically you are in the right about keeping the money think about it for a minute. Is it any skin off your nose to give the money back? How good is it going to be if you refuse to give the deposit back and they say, "Ok fine we'll buy the house" and then use a trumped up reason from the inspection to cancel the deal 2 months from now.

All I'm saying is if they have second thoughts about buying the house, it's better that they don't buy and let you know now.

 

[Vic]

Originally posted by: JulesMaximus
Yes, it will vary by state. You generally don't have attorneys involved in real estate transactions (not for personal property anyway). Your realtor should know what the laws are in this respect though. This is pretty clear cut and not subject to legal battling in the courts. At least not in CA.

I just got off the phone with my wife and this is law in CA. 17 days, buyer can back out for ANY reason or NO reason at all. If your realtor doesn't know the laws they shouldn't be selling real estate.

Wow... sounds like there's very little point in signing a Purchase Agreement at all if the buyer can just walk away and leave the seller hangin. CA obviously has very lenient laws (I don't do business there).

BTW, this is in New York, where the use of lawyers is common throughout the entire process. Most of the east coast is like that.

And Murpheeee is out something. All sellers are when this happens. He's out a buyer. He may have had other offers on the home from other prospective buyers which he had to dismiss when this prospect signed the Purchase Agreement only to walk away. As those other prospects may have already found other homes, or may have made lower offers, he now has to re-negotiate everything and probably from a position of weakness now.

 

[Murpheeee]

Originally posted by: yamahaXS
are you out anything? did you turn away any prospective buyers? i would be irritated too, but I don't think I would keep their earnest money unless I was out something.

Well we had another interested party call for a second showing....they were told that we were in attorney review.
My realtor is now frantically trying to reach them - but I am sure they will wonder why someone backed out.

We also had an open house scheduled for Sunday which was cancelled and pulled it out of the Real Estate Saturday supplement.

Also it's pushing things back into Thanksgiving holiday period

PLUS the owners of the house we are moving to are going to be pissed - as its all contingent on the sale of ours - I am sure they will be looking for another buyer now.

 

[JulesMaximus]

Originally posted by: Murpheeee

Originally posted by: JulesMaximus
Yes, it will vary by state. You generally don't have attorneys involved in real estate transactions (not for personal property anyway). Your realtor should know what the laws are in this respect though. This is pretty clear cut and not subject to legal battling in the courts. At least not in CA.

I just got off the phone with my wife and this is law in CA. 17 days, buyer can back out for ANY reason or NO reason at all. If your realtor doesn't know the laws they shouldn't be selling real estate.

I have bought 3 houses and sold 2 in NJ and NY states.
I have worked with 3 realtors and one them had more than a basic understanding of real estate law....it's not their job.
Lawyers were used by all parties all through transaction and closing.

Here all paperwork is handled and originates with the real estate agent. She has legal advise available to her if she needs it but there are no lawyers present when documents are signed and most transactions are handled by the escrow companies and title companies.

So, you have to hire a lawyer to buy a house in NJ or NY? Good god, how does anything get done there?

 

[HomeBrewerDude]

Originally posted by: Murpheeee

Originally posted by: yamahaXS
are you out anything? did you turn away any prospective buyers? i would be irritated too, but I don't think I would keep their earnest money unless I was out something.

Well we had another interested party call for a second showing....they were told that we were in attorney review.
My realtor is now frantically trying to reach them - but I am sure they will wonder why someone backed out.

We also had an open house scheduled for Sunday which was cancelled and pulled it out of the Real Estate Saturday supplement.

Also it's pushing things back into Thanksgiving holiday period

PLUS the owners of the house we are moving to are going to be pissed - as its all contingent on the sale of ours - I am sure they will be looking for another buyer now.

In that case, I would not return the earnest money.

 

[bernse]

Originally posted by: JulesMaximus
I guess I have more faith in real estate agents than you do.

Probably so. Wouldn't take much. I have almost no faith or respect for real estate agents. I am sure there are one or two honest to goodness people out there that put your interests before theirs, but I have yet to see one. I suspect your wife is one of the few good ones!

I have yet to find one that wants to work more than 6 hours for you... they just want their 4% (or whatever) commission and find the next guy. Very phoney.

I have found their ethics extremely lacking to the point of almost non-existant and a step down the ladder from a car salesman. The small amount of research that I have done has shown that pretty much anyone can be a real estate agent if they can pass some "test" that their board puts out. Hell, they don't even have any education minimums! Study for a few weeks, pass the test, become a real estate agent! Weeeeee!

 

[MP5SD]

I am no lawyer, but I think you can keep the deposit...

 

[JulesMaximus]

Originally posted by: bernse

Originally posted by: JulesMaximus
I guess I have more faith in real estate agents than you do.

Probably so. Wouldn't take much. I have almost no faith or respect for real estate agents. I am sure there are one or two honest to goodness people out there that put your interests before theirs, but I have yet to see one. I suspect your wife is one of the few good ones!

I have yet to find one that wants to work more than 6 hours for you... they just want their 4% (or whatever) commission and find the next guy. Very phoney.

I have found their ethics extremely lacking to the point of almost non-existant and a step down the ladder from a car salesman. The small amount of research that I have done has shown that pretty much anyone can be a real estate agent if they can pass some "test" that their board puts out. Hell, they don't even have any education minimums! Study for a few weeks, pass the test, become a real estate agent! Weeeeee!

It is a lot of hard work. My wife works her ass off to get listings and sell homes. She has even held open house on homes she isn't listing to meet people and get more name recognition and build up the business. She has a B.S. degree in business and managed large industrial property for years before she just burned out on the hours and the work. She has been in real estate now for 3 years selling but has had her license for 14 years now.

If she doesn't know something she will go out of her way to find the answer and she is always looking out for her clients.

I've purchased 2 homes and sold one and never dealt with a lawyer at any point during the process. The contracts are fairly straightforward and I'm sure they are drawn up by lawyers originally and there are things in there that she can change but at no point in any of my real estate dealings did I deal with or talk to or, more importantly, pay for legal counsel.

I think lawyers are down there with car salesmen quite frankly and there are many that are just slime.

 

[flot]

Definitely a lawyer question.

Your realtor SHOULD know but the honest truth is that most of them would have no clue. A real estate lawyer is what you're looking for in this case.

Offhand (I have some real estate knowledge, enough to be a bad realtor if I wanted to ;-) it sounds like the earnest money may be yours, but in all honesty most RE contracts have so many loopholes in them, the seller can probably find a way out.

 

[JulesMaximus]

I just IM'd my sister who lives in Albany, NY.

me: did you have a lawyer when you bought your house?
My sister: no
My sister: yes
My sister: yes we did - at the closing
me: what did they do?
My sister: they sat at the closing, and did the background check on the house and told us where to sign our lives away
me: a chimp could have done that though right?
My sister: pretty much, except for the background check to make sure there were no liens on the house

Here a Real Estate agent (my wife can do this from our house over the internet) can pull a property profile on the house which will indicate if there are liens on a house.

 

[bernse]

A lawyer isn't necessary for the contract.

However, I'd recomend a lawyer for checking into the property (Title searches, leins and other encumbrances) making sure that the RPR is valid, yadda. Sure, you can do that yourself, but that'll cost you in time and money. Those are included in most lawyers fees.

Besides, for purchasing/selling a home a lawyer generally won't cost more than $1500-$2000 (depending on the cost of the home) whereas Real Estate commissions can easily set back a seller 6-7%. On a $300000 home that's a lot of scratch! A lawyer is valuable just for the liability issues alone, not to mention just legal advice such as this.

Personally, I'd ditch an agent before a lawyer. They're cheaper and can do more for you where liability and serious $$$ questions come up.

Nothing against your wife though, she sounds like a great lady. Honestly.

And I'm not going to argue that many lawyers=scum. However, I'd argue that on a per hour basis, a real estate agent makes way more money than almost any lawyer.

 

[JulesMaximus]

Originally posted by: bernse
However, I'd argue that on a per hour basis, a real estate agent makes way more money than almost any lawyer.

True, my argument is that a lawyer isn't really necessary though. It's not as though you can't use a simple generic contract for most personal real estate transactions and here a real estate agent can pull a property profile on any property. So, there goes a $1500-$2000 fee.

My first home was $115,000. We sold it 2 years later for $165,000 and we bought a $225,000 home (which is now worth about $430,000). Real Estate agents make 3% sometimes as little as 2% on a sale unless they are representing both the buyer and seller (yes this can happen and it is a tricky situation). Most of the homes my wife lists are in the $400-500k range. She did sit an open house on a nice 2bd 2bth condo right on the ocean though listing at $1.2 million (but she won't see any of that unless she represents a buyer).

BTW-the office she works for takes about 20% of her commission.

 

[bernse]

Originally posted by: JulesMaximus Real Estate agents make 3% sometimes as little as 2% on a sale unless they are representing both the buyer and seller (yes this can happen and it is a tricky situation)..

Generally, its each agent makes 3% though, so there is 6% of the value of the house.

Personally, I'd do away with the agents, save say 12K on a 200000 and have each the buyer/seller pay a lawyer $2K instead of the $6K each to their agents.

But thats just me.

 

[Vic]

Everyone always dreams of getting ridding of the salespeople. "Overpaid parasites" we're called.

Then they wonder why no one buys their products and/or they can never find what they're looking to buy...

 

[bernse]

Originally posted by: Vic
Everyone always dreams of getting ridding of the salespeople. "Overpaid parasites" we're called.

Then they wonder why no one buys their products and/or they can never find what they're looking to buy...

Anyone that wishes away the salespeople but can't bother educating themselves deserve what they get.

 

[JulesMaximus]

Originally posted by: bernse

Originally posted by: JulesMaximus Real Estate agents make 3% sometimes as little as 2% on a sale unless they are representing both the buyer and seller (yes this can happen and it is a tricky situation)..

Generally, its each agent makes 3% though, so there is 6% of the value of the house.

Personally, I'd do away with the agents, save say 12K on a 200000 and have each the buyer/seller pay a lawyer $2K instead of the $6K each to their agents.

But thats just me.

Yes, I know. It is 6% total but I was talking about representing one party (buyer or seller).

Good luck finding a lawyer to sit open houses for you or one to handle the escrow company or arrange inspections or show you property when you are looking to buy.

I think a good real estate agent is worth the money they make (obviously I'm a little biased though).

 

[bernse]

Originally posted by: JulesMaximus

Yes, I know. It is 6% total but I was talking about representing one party (buyer or seller).

Good luck finding a lawyer to sit open houses for you or one to handle the escrow company or arrange inspections or show you property when you are looking to buy.

I think a good real estate agent is worth the money they make (obviously I'm a little biased though).

Show your property or open houses? Who would ever even think of asking a lawyer to do that? That's why you sell/buy privately is so you don't have to have agents and others do it plus save you several $$$. The lawyer is just there to handle the legal and liability issues. Not walk Uncle Joe through the house or arrange the inspections. Nobody even suggested that.

Every home we've bought and sold the lawyers have handled the escrow in a non interest bearing account. It isn't difficult to find one to do that.

I'll gladly arrange for a home inspector or show my home to a dozen prospective purchasers if it'll save me $6K.

 

[JulesMaximus]

Originally posted by: bernse

Originally posted by: JulesMaximus

Yes, I know. It is 6% total but I was talking about representing one party (buyer or seller).

Good luck finding a lawyer to sit open houses for you or one to handle the escrow company or arrange inspections or show you property when you are looking to buy.

I think a good real estate agent is worth the money they make (obviously I'm a little biased though).

Show your property or open houses? Who would ever even think of asking a lawyer to do that? That's why you sell/buy privately is so you don't have to have agents and others do it plus save you several $$$. The lawyer is just there to handle the legal and liability issues. Not walk Uncle Joe through the house or arrange the inspections. Nobody even suggested that.

Every home we've bought and sold the lawyers have handled the escrow in a non interest bearing account. It isn't difficult to find one to do that.

I'll gladly arrange for a home inspector or show my home to a dozen prospective purchasers if it'll save me $6K.

Most people would not. It's more work than you think. Listing the home, not to mention the fees you must pay to the board to belong to the MLS and list your properties. Then there are other boards you need to belong to and insurance fees. You have to have a lockbox key to get into other homes you might be interested in buying. You have to market the house you are selling. You need access to the MLS to find a house you might want to buy.

How do you plan on finding a buyer for your house if you can't access the MLS? I've seen 'For Sale by Owner' houses sit for months because they aren't marketed properly-tell me this doesn't cost the owner thousands of dollars. But hey, if you think you can do as good a job then more power to you. Most people don't have the time, patience or knowledge to properly represent themselves.

Did you know that some real estate agents won't even show for sale by owner properties?

My .02

 

[bernse]

Originally posted by: JulesMaximus
Most people would not. It's more work than you think. Listing the home, not to mention the fees you must pay to the board to belong to the MLS and list your properties. Then there are other boards you need to belong to and insurance fees. You have to have a lockbox key to get into other homes you might be interested in buying. You have to market the house you are selling. You need access to the MLS to find a house you might want to buy.

How do you plan on finding a buyer for your house if you can't access the MLS? I've seen 'For Sale by Owner' houses sit for months because they aren't marketed properly-tell me this doesn't cost the owner thousands of dollars. But hey, if you think you can do as good a job then more power to you. Most people don't have the time, patience or knowledge to properly represent themselves.

Did you know that some real estate agents won't even show for sale by owner properties?

My .02

Well duh! I should hope that they wouldn't show a for sale by owner property. Why would they? The owner obviously has no intention of paying them any commission! That's why they're selling privately! That's the whole reasoning by For Sale By Owner. You totally eliminate the MLS, the board, the agents and the costs that go with it. YOU DO NOT NEED TO GO ON MLS TO SELL YOUR HOUSE. ALL IT IS IS ADVERTISING AND GIVING AGENTS ACCESS TO YOUR HOME.

You advertise in the paper and wherever you want. If the market is good, it'll sell. If its not good you may be advised to go with an agent and pony up the $$$. However, even in those instances since the private seller will probably be asking less than a comperably listed home with an agent, it could very easily sell faster.

Hundreds of homes sell everyday without the services of an agent or MLS. Much to their displeasure. It may make the job easier, but it is in no way necessary.

*edit coding*

 

[JulesMaximus]

Well duh! I should hope that they wouldn't show a for sale by owner property. Why would they? The owner obviously has no intention of paying them any commission! That's why they're selling privately! That's the whole reasoning by For Sale By Owner. You totally eliminate the MLS, the board, the agents and the costs that go with it. YOU DO NOT NEED TO GO ON MLS TO SELL YOUR HOUSE. ALL IT IS IS ADVERTISING AND GIVING AGENTS ACCESS TO YOUR HOME.

You advertise in the paper and wherever you want. If the market is good, it'll sell. If its not good you may be advised to go with an agent and pony up the $$$. However, even in those instances since the private seller will probably be asking less than a comperably listed home with an agent, it could very easily sell faster.

Hundreds of homes sell everyday without the services of an agent or MLS. Much to their displeasure. It may make the job easier, but it is in no way necessary.

*edit coding*

Well, you just pointed out the reason for hiring a real estate agent. If you want your house to sit on the market for months then by all means list it yourself and try to sell it yourself. I've seen these exact results in what is arguably the best real estate market ever!!!

If you want to sell it in a reasonable amount of time then consult an agent.

There is no reason to yell or be hostile. I just disagree with you.

Here endeth the lesson.