Author Topic: How hard should we fight for all of our earnest money?  (Read 869 times)

njm5785

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How hard should we fight for all of our earnest money?
« on: June 27, 2018, 05:51:30 PM »
My wife and I put in an offer on a house in the middle of May and we put down the standard 1% earnest money. Along the way we hit a lot of roadblocks from the sellers not wanting to let us get inspections to delaying inspections. We had to sign 2 addendums give them longer on getting a well and septic inspection and another addendum to extend the contract a little over a week. Then a week before we were going to close our title company found out that a fence and an outbuilding on the property we were buying was encroaching onto the neighbors property. The title company recommended that an encroachment agreement would solve the problem, but we did not feel very comfortable with that. The sellers went ahead and got paperwork for the encroachment agreement and came to an agreement with the neighbor. But we still saw it as a ding against the property, even though it is a legally binding contract it just didn't feel like a good fix to us and we never signed anything stating that we agreed to it.

In that process we also found out, from our title company, that what the seller gave us as a survey was not a true survey, but was instead a plot map from a builder who did an addon to the house a few years ago. To make matters worse the title company said that there was no survey on record for that property but based on a few of the adjoining properties and survey stakes they found in the ground they had a good idea of the property lines and that is how they figured out there was an encroachment. The adjoining properties that had the surveys though were surveyed back in the early 90s. Per our contact though the seller was to provide us with a recorded survey, but we did not specify the age the survey had to be.

With all the headaches along the way and these final two things about the encroachment and survey we decided to end the contract. The sellers thinks they are in the right because they got the encroachment agreement signed and said they did it because it was what we wanted. We feel sorry for the sellers because this whole process has kept their house off the market for over a month, but in the end it is not really our fault, at least not how we see it. I talked to our broker and he was saying we have a few options.

1. We could all (us, sellers, brokers, realtors) sit down in a room and talk it out and see who gets the money or how it is split.
2. We could have our broker work it out with their broker and see who gets the money or how it gets split.
3. The sellers restructured the outbuilding and moved the fence so that they would not have to have an encroachment agreement and have relisted the property, so we could always try and get the property again, but there is still not a recorded survey. My wife and I like the property but not sure if we want to deal with this mess again on this property.

We would like to get all our earnest money back because we are already out the inspection money, but we feel bad for the sellers too. We am not even sure we can get it all back because both parties think they are in the right and both parties have to come to an agreement, or it has to go to court. But court would cost us more money because then we would be paying for a lawyer too. Should we offer to give them part of the money for their troubles in hopes that they will accept and move on? What if they want all the money?
« Last Edit: June 27, 2018, 05:53:01 PM by njm5785 »

sammybiker

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Re: How hard should we fight for all of our earnest money?
« Reply #1 on: June 27, 2018, 06:14:10 PM »
Your agent should be your advocate and providing direction and protection.  I don't like the three option approach.

This is 1% of a $100k house or a $500k house?

How long have you had their property off-market for inspections, etc?  Two weeks or two months?

I'm dealing with a similar situation, except the sellers decided my 1% earnest funds were not sufficient (I opted to release the earnest funds and move on).  They are now asking for 10% of the sales price to terminate the contract while threatening to sue for failure to execute the contract.  I've had to pay my attorney to review the case, identify holes in their case (undisclosed conditions with the property, similar delays in inspections as you're dealing with), issue a letter to them pipe down and go away.

The attorney fees are now equal to the earnest funds I released.  So, not ideal - but in my case, this is an $85k house, so damage is minimal.

I would consult with your agent and perhaps your agent's broker  Going the attorney route sucks and is needlessly expensive for both parties.

If they are being combative, a partial release of earnest funds (as you mentioned) to avoid expensive litigation is a good direction.  A lot goes back to how much the earnest funds really are.  If you're talking 1% of $500k, it may be worth $800 to hire an attorney, clearly identify where the sellers misstepped and issue them a letter demanding earnest funds returned or else.

Hope this helps and update this thread as it progresses - hopefully to a reasonable outcome with minimal out of pocket for you.
« Last Edit: June 27, 2018, 06:18:16 PM by sammybiker »

MommyCake

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Re: How hard should we fight for all of our earnest money?
« Reply #2 on: June 28, 2018, 04:58:05 AM »
I disagree with your agent about the options available.  According to what you've written, the sellers did not uphold their end of the contract.  They were responsible for providing a survey, and they did not.  In my area, the buyer typically pays for the survey, but regardless if your contract stated this then they are obligated to provide it.  There should be no "split" of the deposit because you were not in breach of the agreement.  I think you should discuss this with your agent and let him or her know you are considering contacting an attorney if the matter is not resolved quickly.  The attorney fee should be much less than deposit.  If you still want to pursue the property, a survey will show if the encroachment has been resolved as stated.  In the future I would consider using an attorney, and would reconsider your current agent.  Good luck!  Let us know what happens.

njm5785

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Re: How hard should we fight for all of our earnest money?
« Reply #3 on: June 28, 2018, 10:26:21 AM »
This is 1% of a $100k house or a $500k house?
It is on a $400K house so it is not a small chunk of change.

How long have you had their property off-market for inspections, etc?  Two weeks or two months?
It was off the market for around 40 days, but a lot of that was their fault because they were being difficult in letting us get/schedule inspections.

I'm dealing with a similar situation, except the sellers decided my 1% earnest funds were not sufficient (I opted to release the earnest funds and move on).  They are now asking for 10% of the sales price to terminate the contract while threatening to sue for failure to execute the contract.  I've had to pay my attorney to review the case, identify holes in their case (undisclosed conditions with the property, similar delays in inspections as you're dealing with), issue a letter to them pipe down and go away.

The attorney fees are now equal to the earnest funds I released.  So, not ideal - but in my case, this is an $85k house, so damage is minimal.
Sorry to hear about the issues you have run into yourself, dealing with what we already have I would hate for them to try and come after us for more money. Hopefully you get it sorted out without too much more stress or cost.

They were responsible for providing a survey, and they did not.  In my area, the buyer typically pays for the survey, but regardless if your contract stated this then they are obligated to provide it.  There should be no "split" of the deposit because you were not in breach of the agreement.
Going into this deal a month ago I didn't even think of a survey, it was our agent that recommended we request one. We thought it was a great idea and they agreed to it by signing. Based on what we have gone through now I would always want a recent survey, and if it meant I had to buy it I would.

Your agent should be your advocate and providing direction and protection.  I don't like the three option approach.
...
I would consult with your agent and perhaps your agent's broker  Going the attorney route sucks and is needlessly expensive for both parties.
There should be no "split" of the deposit because you were not in breach of the agreement.  I think you should discuss this with your agent and let him or her know you are considering contacting an attorney if the matter is not resolved quickly.  The attorney fee should be much less than deposit.  If you still want to pursue the property, a survey will show if the encroachment has been resolved as stated.  In the future I would consider using an attorney, and would reconsider your current agent.  Good luck!  Let us know what happens.
It was my agent's broker that mentioned the 3 options. I guess I should clarify a little more. He wasn't saying it would be a split, but he mentioned that both parties have to agree on the outcome of the money unless we want to take it to court. So in order for it to not go to court he offered the 3 options and asked if we would we be willing to offer them part of the money to make them feel better about losing 40 days. At the end of the day he thinks we were in the right, but he mentioned it would be easier if we didn't go to court over it. I am considering an attorney, but just worried about that eating up all the money.

I will keep you guys updated on more news I find out. I am going to be speaking with the broker again today.

sammybiker

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Re: How hard should we fight for all of our earnest money?
« Reply #4 on: June 28, 2018, 02:18:14 PM »
Sounds good, looking forward to updates.

Call up a couple attorneys and ask what a letter would cost.  It cost me $800 (Texas - attorney is out of Dallas and a bit expensive) and if the cost is similar for you, it may be worth it to recollect $4k. 

Duke03

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Re: How hard should we fight for all of our earnest money?
« Reply #5 on: June 29, 2018, 01:39:07 PM »
I've never understood how so many people get spooked in a real estate transaction.  I under stand a lot of money is on the line but it just seems like so many people will change their mind at a drop of a hat.  Every deal in life has hiccups.  Either you work towards a solution or you walk away.  Me personally I'd give you back your earnest money and wouldn't sell you the house for any amount of money.  Either you want it or not.  A survey cost $400 so your risking losing your earnest money over a $400 survey?   It just blows my mind that their are brokers that inept at doing a deal that this even gets brought up.  If I was a broker I'd pay for the survey and not risk losing thousands on a deal.  Of course I know how to close a deal.


To the OP:  I'm not trying to beat you up.  If you truly want out of the deal it shouldn't be too hard to get your earnest money back.

August26th

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Re: How hard should we fight for all of our earnest money?
« Reply #6 on: June 29, 2018, 01:57:31 PM »
It sounds like you terminated out of frustration more than anything else.... not because of insurmountable issues. Yes, the seller was not on the ball (nor their real estate agent apparently, which honestly I’d be more upset at them than the sellers!) but if they’ve fixed the encroachment issue, why not just write another contract? If you can leave emotion out of it, which I do understand is difficult, do you want the house or not? If so, figure out an amicable solution and go for it. Can you apply the old earnest money to the new one? Or are the sellers angry with you and not likely to play ball? 

If you like the house and want the house, my motto is that there’s always a “third way”. Between the hard yes or the hard no can be a solution that everyone can live with.

Best wishes on whatever you decide!

Embok

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Re: How hard should we fight for all of our earnest money?
« Reply #7 on: July 01, 2018, 11:53:56 AM »
If you want a realistic assessment of your options, pay a competent real estate lawyer in your area for an hour or two to review the file, including the survey and encroachment information you have, and give you a recommendation.  Brokers are generally out of their depth when advising about legal/contractual consequences.  It also sounds like you might be able to put the deal back together again if you still want the house.