Author Topic: Real Estate Help!  (Read 8070 times)

nylorac087

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Real Estate Help!
« on: March 27, 2014, 08:08:27 PM »
My husband and I live in Baltimore, and we've been looking for a home to buy since January. Because I commute to Washington, D.C. on the train every day, we have to live within a half mile walking radius of the train station (we don't have a car). Given Baltimore's crime rates, there are only so many streets where we can live, severely limiting the houses available to us. On top of that, because of our Mustachian values and retirement goals, we're not willing to go above a certain purchase price.

Despite all of this, we found a house that we love, close to the train station and in a slightly shady but definitely up-and-coming neighborhood (Johns Hopkins just bought a bunch of abandoned but historic property in the area to develop into theaters and studios). It was listed at $185,000. Given that the sellers bought it in 2009 for $147,000, we felt that was high. We offered $160,000. The sellers replied saying in order to move, they needed at least $167,000. We agreed to the purchase price and signed the contract. After the inspection, the sellers refused to fix any of the repairs (approximately $5,000 worth). They also refused to let us do a termite inspection until we agreed to buy the house and fix all of the repairs because they wanted to quickly get it back on the market if we asked to be released from the contract. Our agent informed us that the sellers felt they had agreed to a bad deal and could get more if they waited until the summer and thus wanted us to back out. Because the house was still such a financial bargain and perfectly met all of our needs, and there are NO other suitable houses on the market, we agreed and continued on. Today, a week later (a full month after we signed the original contract) after we agreed to pay all the repairs on our own, our real estate agent informed us that the husband-seller just lost his job, and they are in "dire financial straits" and asked us to please not buy their house. 

My husband and I are both lawyers, and we've read the contract. Legally, they have to sell us the house.

Interest rates our rising; summer is not a good time to buy a house, and our apartment lease is up in August, and we really like this house. There are still no other suitable houses. Moreover, we're wasting rent money when we could be paying a mortgage. This house is a huge financial find, especially given its size and the fact that it's in an improving neighborhood. We don't want to kick these people out of their house (they have a baby), but we could not get a similar house for, at the absolute minimum, $200,000 or $210,000. (The price that two houses several houses down from this house just sold for.) But, as I said, there aren't any houses currently for sale, at all, in the right neighborhood. What do we do? If somebody is in dire financial straits, wouldn't they want to sell their house for a $20,000 profit? Could they be lying? Are they just going to turn around and put the house on the market in a month? Is it just incredibly bad to kick people out into the street with a baby and no job??


arebelspy

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Re: Real Estate Help!
« Reply #1 on: March 27, 2014, 10:40:14 PM »
My husband and I are both lawyers, and we've read the contract.

Right, so you'll want to look specifically at the remedy for nonperformance.  Being lawyers I'm sure you're familiar with "specific performance."  You may also want to research into clouding title.

I don't see a moral dilemma - you have an agreement to purchase their item at $x.  Nothing material to the contract changed.  If you had to back out would they give you your EMD back?  Maybe, maybe not.

Pretty much only you can decide what you want to do, but I'm not sure why a job loss means they can't sell the house - it's probably better for them to do so, even if they don't see it right now.
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Weedy Acres

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Re: Real Estate Help!
« Reply #2 on: March 28, 2014, 05:47:05 AM »
I would proceed with the deal.  I don't see how losing a job makes it critical to stay in a house.  Typically it's the opposite.  Selling the house would let them put cash in their pocket to live off of during his job search time. 

I suspect it's a last-ditch ploy, given their behavior until now.  They're having seller's remorse. 

Another Reader

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Re: Real Estate Help!
« Reply #3 on: March 28, 2014, 07:39:33 AM »
They probably don't want to sell the house now because they no longer qualify to buy another house.  They want to keep the one they have.

You have behaved in good faith.  The contract is likely enforceable.  You are in the driver's seat.

I did let someone out of a contract to buy a house and returned the earnest money.  She was a single mom and it turned out her agent and the loan officer had both misled her about financing.  When they came back with a request to extend so she could get a really bad mortgage, I offered to release her from the contract and refund her earnest money.  I think she was relieved to be able to get out and I ended up selling later for a higher price.  Sometimes it's about the people, not the contract.

GoldenStache

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Re: Real Estate Help!
« Reply #4 on: March 28, 2014, 08:01:55 AM »
I have seen a similiar situation that the buyers went through with the deal and the sellers ended up putting quickcrete in a toilet and it cost them over $10k to redo the plumbing.

Did the inspector look for termite problems (didn't see any) but was not able to drill for the inspection?


arebelspy

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Re: Real Estate Help!
« Reply #5 on: March 28, 2014, 08:07:23 AM »
I have seen a similiar situation that the buyers went through with the deal and the sellers ended up putting quickcrete in a toilet and it cost them over $10k to redo the plumbing.

You will naturally want to do a final walkthrough to look for any damage before closing.. Then you can cancel if something has materially changed and the sellers will be left with whatever damage they did.

I think the bottom line is that you can force them to sell it to you.  Whether or not you would want to is up to you.

I'd suggest sitting down and discussing the situation with the sellers (agents not necessary, though they will try to insist, if they want to sit in, that's fine, but talk directly with the sellers) so you can get a feel for what is best for both parties and try to come up with a win-win.
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Milspecstache

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Re: Real Estate Help!
« Reply #6 on: March 28, 2014, 10:40:02 AM »
Could your agent tell their agent to drop the hint that you both are lawyers?  I bet that would convince them to do things in an orderly manner.

If I did plan on letting someone out of deal I would want compensation for all the things I had spent money on: inspections, etc. 

BlueHouse

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Re: Real Estate Help!
« Reply #7 on: March 28, 2014, 12:11:46 PM »
I'm not a lawyer, but I always thought the seller could change their mind up until they actually signed the sales contract (as long as they weren't changing it to sell to someone else, but instead decided to stay in the house). 

From a purely human point of view, I think you should let them out of the contract.  The best deals are those where every party feels like it's a good deal.   The sellers may be worried that they can't buy or even rent without an income stream to show.  They may also realize they can't afford another.    Let it go.  It's just a house.  You can afford to find another.  Besides, if they want to hurt you or egg your house, etc, they'll KNOW where you live.   Just my two cents.

SunshineGirl

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Re: Real Estate Help!
« Reply #8 on: March 28, 2014, 12:33:39 PM »
We had a situation where we bought a house that had been overpriced and sitting on the market for 18 months. We made a low ball offer that was accepted, and then about halfway through the process, the seller got an offer for about 20K more, which he wanted to take and thus stopped doing the repairs he had previously agreed to do.

We pushed forward - got a lawyer, went to the closing and performed our end of the contract even though we knew the seller would not show up and sign the papers - but we had to stay in compliance. Once the seller realized we were not walking away and that HE was out of contract and therefore could have to pay our lawyer's fees, things got resolved quickly.

My advice: Location is extremely important to you, and it's not like other properties have been made available, and you love this property, so I'd forge on.

arebelspy

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Re: Real Estate Help!
« Reply #9 on: March 28, 2014, 12:39:38 PM »
I'm not a lawyer, but I always thought the seller could change their mind up until they actually signed the sales contract (as long as they weren't changing it to sell to someone else, but instead decided to stay in the house). 

That's true, but they did sign the sales contract.  Presumably weeks ago. 
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GregO

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Re: Real Estate Help!
« Reply #10 on: March 28, 2014, 12:51:19 PM »
I'd suggest sitting down and discussing the situation with the sellers (agents not necessary, though they will try to insist, if they want to sit in, that's fine, but talk directly with the sellers) so you can get a feel for what is best for both parties and try to come up with a win-win.

I agree with this.  You could also then get a read on how much you trust what they are saying.  But more importantly, I would think you could come up with a deal that worked for both of you.  What about buying the house and renting it back to them while they find a job?  I'm no real estate expert, but I bet you could even insist that they agree to deposit the rent money (and/or a deposit) in an escrow account.  Or maybe a better idea is to agree to delay closing by a month or two and reduce the purchase price to compensate you for the 'rent' that you are granting them.  If they really are worried and don't just want out of the deal, they will be flexible and come to terms with you.

But more importantly, I still don't see why losing a job means they need to keep the house.  They could still find a place to rent, probably cheaper than their mortgage.  Or maybe they could move in with friends or relatives to save even more money while he looks for a new job.  Selling the house also allows them to be flexible for a new job: they could move anywhere that he can find a job.  Like others have said, I think the reality is that not having the house is better for them.

BlueHouse

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Re: Real Estate Help!
« Reply #11 on: March 28, 2014, 01:48:18 PM »
I'm not a lawyer, but I always thought the seller could change their mind up until they actually signed the sales contract (as long as they weren't changing it to sell to someone else, but instead decided to stay in the house). 

That's true, but they did sign the sales contract.  Presumably weeks ago.
I must not understand it.  Are there different levels of being "on the hook" between the offer and acceptance of an offer (which I guess is a contract) and the actual closing documents (which I was thinking of as "the sales contract).  Do these things differ by state?  I know on my previous purchases, I could walk away from a signed contract by forfeiting my earnest money, but I was not on the hook for the entire purchase.  I don't know anything about the other end of the process.

giggles

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Re: Real Estate Help!
« Reply #12 on: March 28, 2014, 03:01:09 PM »
We had almost the EXACT situation - our sellers had a TON of remorse, refused repairs and a job loss as well.

They tried to delay closing at least 3 months, or "at their convenience".  Our contact had a firm closing date, we declined.  We had the contact on our side, and our mortgage lock was expiriing 7 days after the closing date, so we would lose our great rate if we didn't close, plus we had no where else to live. 

They did not show up for closing date.  Out lawyer sent a letter, I can't remember what he called it, saying since they missed the closing, they had under 1 week later to show up and close or we would sue.

They showed up for the 2nd closing date.  They also left the house a mess, including a HUGE, dark brown stain on the tan carpet.  I was fuming!!  A little elbow grease and Nature's Miracle, and the stain came up (thankfully).  Could have been much worse.

We got the house, kept our great rate, and were only out a storage unit fee and a couple nights in a hotel.  I love our home, and we could not have bought anything as nice as what we got for our price.  Push on!!!

nylorac087

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Re: Real Estate Help!
« Reply #13 on: March 28, 2014, 06:19:39 PM »
Thanks so much everyone for the excellent advice!! We're going to take the weekend, make sure there aren't any comparable houses we could buy, and then make our final decision. It was really great to get some objective, third party advice to help us with our decision. Thanks again!

wtjbatman

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Re: Real Estate Help!
« Reply #14 on: March 28, 2014, 09:52:29 PM »
I feel like forcing them out of their home after what you have been told just reinforces the stereotypes of lawyers having no morals. But I'm just some guy on the internet, so if you want, do what you feel like you're legally allowed to do. You're the one who has to live with yourself after this.

arebelspy

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Re: Real Estate Help!
« Reply #15 on: March 28, 2014, 09:53:31 PM »
I'm not a lawyer, but I always thought the seller could change their mind up until they actually signed the sales contract (as long as they weren't changing it to sell to someone else, but instead decided to stay in the house). 

That's true, but they did sign the sales contract.  Presumably weeks ago.
I must not understand it.  Are there different levels of being "on the hook" between the offer and acceptance of an offer (which I guess is a contract) and the actual closing documents (which I was thinking of as "the sales contract).  Do these things differ by state?  I know on my previous purchases, I could walk away from a signed contract by forfeiting my earnest money, but I was not on the hook for the entire purchase.  I don't know anything about the other end of the process.

Acceptance of the offer is the sales contract.

Closing documents just finalizes it.  You still have a valid, enforceable contract before closing docs are signed.

You could walk away by forfeiting your EMD because most real estate sales contracts have an EMD paragraph stating that this is the seller's sole remedy if the buyer defaults - i.e. the seller can't force the buyer to perform and buy the property, if the buyer cancels, they lose the EMD.  (Note: this is not always the case, read your contracts, contact a lawyer, etc. etc. - but this IS pretty standard in most Realtor contracts.)

This is not the case here.  The sellers are committed when they sign that offer acceptance (just like the buyers are committed when they sign it and deposit the EMD).
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arebelspy

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Re: Real Estate Help!
« Reply #16 on: March 28, 2014, 09:54:20 PM »
I feel like forcing them out of their home after what you have been told just reinforces the stereotypes of lawyers having no morals. But I'm just some guy on the internet, so if you want, do what you feel like you're legally allowed to do. You're the one who has to live with yourself after this.

I'd like to hear your reasoning on why only someone with no morals would do this (i.e. why you find it morally reprehensible).

I could make an argument that having them sell it is morally praiseworthy.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
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wtjbatman

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Re: Real Estate Help!
« Reply #17 on: March 28, 2014, 10:05:21 PM »
I feel like forcing them out of their home after what you have been told just reinforces the stereotypes of lawyers having no morals. But I'm just some guy on the internet, so if you want, do what you feel like you're legally allowed to do. You're the one who has to live with yourself after this.

I'd like to hear your reasoning on why only someone with no morals would do this (i.e. why you find it morally reprehensible).

I could make an argument that having them sell it is morally praiseworthy.

People can argue a lot of things, that doesn't mean any one person is "right". Although to be honest, morally praiseworthy sounds like a bit of a stretch. How about morally defensible? I can possibly imagine a few arguments there.

I just read her story, imagined myself in the seller's shoes, and assuming they aren't lying, felt a lot of empathy for them and their situation. There are countless examples of contracts being broken due to extenuating circumstances, I feel like maybe this should be one of those situations.

arebelspy

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Re: Real Estate Help!
« Reply #18 on: March 28, 2014, 10:30:20 PM »
Maybe.  That's why I suggested a sit down with the sellers.

But to jump to a "forcing them out of their home" and it "reinforcing...having no morals" is a big jump to me without knowing the details of the situation.
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wtjbatman

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Re: Real Estate Help!
« Reply #19 on: March 28, 2014, 10:37:44 PM »
Maybe.  That's why I suggested a sit down with the sellers.

But to jump to a "forcing them out of their home" and it "reinforcing...having no morals" is a big jump to me without knowing the details of the situation.

I know. Sometimes it's hard to reply to lot of these forum posts people make without going too far one way or another. Especially the ones asking for advice. I don't know how many threads I've opened asking for advice, read the one or two paragraphs the OP posted, and didn't reply because I felt like I didn't know enough about their situation. In this case her post isn't even short, yet we still don't have the entire story. Not that everyone should be expected to write a novel. I just know I went off what I read and felt personally about it if I was in their shoes.

Blindsquirrel

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Re: Real Estate Help!
« Reply #20 on: March 28, 2014, 11:26:27 PM »
 Well if you are both lawyers, specific performance for you would be cheap! For the average Joe, when legal fees are factored in, unless there is a great big stack of cash, it is not worth it at all. The job loss kind of sound like hooey to me and I would check up on that a fair bit but I am cynical. Good luck, it is totally your call.

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Re: Real Estate Help!
« Reply #21 on: March 29, 2014, 06:04:00 AM »
I'd enforce the contract personally. The "human" option would be back renting it to them with a short lease.

There are termites in Baltimore? Huh, learn something new every day. $160K for a house there seems like a steal compared to the stories my in-laws have told us (they live over in Canton and have for 30 years through all the ups and downs).

phred

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Re: Real Estate Help!
« Reply #22 on: March 29, 2014, 07:35:39 AM »
Dire financial straits means they can't afford to live there anyway -- no money for insurance, prop. taxes. upkeep.  If they are really dire, they should look on selling the house as a Godsend. 

More than likely they got a better offer, and are trying to make you go away.  At the closing copy down the license plate on their car, and take pictures of them on your cellphone.  This will make it easier to track them down should they leave the house trashed

Daleth

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Re: Real Estate Help!
« Reply #23 on: March 29, 2014, 09:21:21 AM »
And personally I bet its just a scam and they are going to put the house back up for sale...

Because of that possibility, I agree that you should proceed and offer to rent it back to them for a set number of months while they get back on their feet. Their reaction to that offer, particularly if you make it in person, may tell you a lot about what's really going on.