Buyer cancelled because the home's "location doesn't work for us" - escrow?

[ditheca]

I understand that buyer's can back out for almost any reason during their due diligence contingency... but 'We don't like the location' seems like bad faith.

Is the physical location of the property part of "other tests, evaluations and verifications of the Property deemed necessary or appropriate by Buyer" or do I have a reasonable claim on the earnest money?

[GuitarStv]

I understand that buyer's can back out for almost any reason during their due diligence contingency... but 'We don't like the location' seems like bad faith.

Is the physical location of the property part of "other tests, evaluations and verifications of the Property deemed necessary or appropriate by Buyer" or do I have a reasonable claim on the earnest money?

Unless you've moved the location of the home to a new one, I'd say that's an unreasonable reason to be given.  Legally, it depends on the wording of your contract though.

[clarkfan1979]

I scheduled a showing for a potential renter. Before I scheduled, I asked them to make sure that they were ok with the location. It's on a somewhat busy road, which can be a turn-off for some people. I encouraged them to do a "drive-by" and make sure they are ok with the busy road and overall location. They told me they did a "drive-by" and were very interested.

After viewing the house they said they didn't like the busy road because they have a cat and fear that it could get hit by a car. While that's totally reasonable, this should be said before the showing, not after the showing.

They were weird. We agreed that they were going to give me an answer within 24 hours. I didn't hear from him, so after 24 hours, I offered the house to someone else. They actually gave me the news 3 days after the viewing. It's weird that they think I was holding the house for them for multiple days with no communication from them.

A few months later the house was available for rent again. The guy contacted me again and asked to see the house. However, he didn't realize he already viewed the house. It seems like he is the type of person that doesn't pay much attention to details.

[uniwelder]

Where I’m located, the earnest money would be forfeited, according to standard contract. The buyer knew the location so unless there were some details discovered, such as plans for additional lanes to be added to the road, I don’t see how they have a legitimate claim. Are you using a real estate agent? What are they suggesting you do?

[Captain FIRE]

@clarkfan1979 I'm a little perplexed why someone would drive out twice to see a house.  I probably wouldn't bother doing a "pre-visit" beforehand myself.  And it's also fair to intellectually know it's a busy road and then seeing it in person, hearing road sounds in the house, realize it's more than you anticipated.  Or it could be something else entirely but easier to blame the road.

[Sibley]

@clarkfan1979 I'm a little perplexed why someone would drive out twice to see a house.  I probably wouldn't bother doing a "pre-visit" beforehand myself.  And it's also fair to intellectually know it's a busy road and then seeing it in person, hearing road sounds in the house, realize it's more than you anticipated.  Or it could be something else entirely but easier to blame the road.

I've done drivebys of apartments before I went for a showing.

[Dr Kidstache]

I just bought a house in a crazy market location. I'm not a lawyer but, looking at my offer contract, I think it would have been ok to back out and not forfeit the earnest money. The contract has a list of due diligence clauses including "any matter deemed material to the Buyer in making a decision to purchase the Property". Seems pretty vague. Most buyers here are remote and not even viewing places in-person so they well and truly could be surprised by an aspect of a location once they saw somewhere IRL.

[Omy]

In most contracts with a home inspection contingency, the buyer has a period of time to back out for any reason. It really depends on the contract. What does yours say?

If they've said this prior to doing an inspection, count your blessings and move on before you have to disclose any discovered problems to the next buyers.

[erutio]

It was probably a "bad faith" offer like you said, but good luck trying to keep that earnest money.  The buyers can easily change their reason to something else that falls more neatly into one of the due diligence clauses.  I would just move on from this offer and get your property listed again ASAP .

[clarkfan1979]

@clarkfan1979 I'm a little perplexed why someone would drive out twice to see a house.  I probably wouldn't bother doing a "pre-visit" beforehand myself.  And it's also fair to intellectually know it's a busy road and then seeing it in person, hearing road sounds in the house, realize it's more than you anticipated.  Or it could be something else entirely but easier to blame the road.

That's a good point about the noise level inside the house. I guess you don't know that until you walk inside the house.

I'm trying to remember the details of the showing. I think I was doing an open house type showing over the weekend. The prospective tenants gave me a long sob story about how they were desperate for housing but not available over the weekend and wanted to schedule a private showing 3-4 days prior. They said they really liked it and wanted it but needed to walk the house, just to make sure. I wasn't going to be in town yet, so I had to ask my current tenants (at the time) for a favor and show it for me.

When they said they didn't want it because the road was dangerous for their cat, I was upset because that was something that was very obvious before seeing the house. Lesson learned. I'm not doing that again. People can see the house over the weekend with everyone else. If they are not available, then I guess they don't get the house. 

[PDXTabs]

Is the physical location of the property part of "other tests, evaluations and verifications of the Property deemed necessary or appropriate by Buyer" or do I have a reasonable claim on the earnest money?

Is it possible that they spent a long time walking the neighborhood and changed their mind? I would say that in general, yes, location is something that would be a reasonable verification of the property that could be necessary or appropriate for the buyer. But I'm not a lawyer.

[Paul der Krake]

It was probably a "bad faith" offer like you said, but good luck trying to keep that earnest money.  The buyers can easily change their reason to something else that falls more neatly into one of the due diligence clauses.  I would just move on from this offer and get your property listed again ASAP .

Wouldn't you just point to their own communication that specifically spelled out it was the location they didn't like? That seems like a slam dunk to me.

[Omy]

They don't like the location AND the *fill in the blanks* need to be replaced. Super easy for buyers to get out of most contracts. Why force a buyer to come up with issues that you will be burdened to disclose to the next buyers?

What has this actually cost you? Are you willing to pay an attorney to fight this...and likely lose?

If they bailed out at the last minute and had taken you off the market for a month, you'd have a stronger case.

[Chris Pascale]

I scheduled a showing for a potential renter. Before I scheduled, I asked them to make sure that they were ok with the location. It's on a somewhat busy road, which can be a turn-off for some people. I encouraged them to do a "drive-by" and make sure they are ok with the busy road and overall location. They told me they did a "drive-by" and were very interested.

After viewing the house they said they didn't like the busy road because they have a cat and fear that it could get hit by a car. While that's totally reasonable, this should be said before the showing, not after the showing.

They were weird. We agreed that they were going to give me an answer within 24 hours. I didn't hear from him, so after 24 hours, I offered the house to someone else. They actually gave me the news 3 days after the viewing. It's weird that they think I was holding the house for them for multiple days with no communication from them.

A few months later the house was available for rent again. The guy contacted me again and asked to see the house. However, he didn't realize he already viewed the house. It seems like he is the type of person that doesn't pay much attention to details.

It's very odd to me he hadn't sorted his housing situation a few months later.

August, 2020 I was scrambling for a rental because I sold my house for cash, but a few months later I was not.......you know, because I locked that down.

[Linea_Norway]

I am not sure private viewings pay off. When we sold a house, a number of years ago, we did two public viewings and after that private viewings. The latter was a lot of work, keeping the house tidy, taking time off. And I didn't sell to any of them. Then we decided to take a break, change a few things and do a new public viewer. That worked and we sold. Doing a person a courtesy with a private viewing does not increase your chances for sale/rent.

[ixtap]

I am not sure private viewings pay off. When we sold a house, a number of years ago, we did two public viewings and after that private viewings. The latter was a lot of work, keeping the house tidy, taking time off. And I didn't sell to any of them. Then we decided to take a break, change a few things and do a new public viewer. That worked and we sold. Doing a person a courtesy with a private viewing does not increase your chances for sale/rent.

I think that depends on the market, but it certainly has been affected by COVID in some places.

[Omy]

I scheduled a showing for a potential renter. Before I scheduled, I asked them to make sure that they were ok with the location. It's on a somewhat busy road, which can be a turn-off for some people. I encouraged them to do a "drive-by" and make sure they are ok with the busy road and overall location. They told me they did a "drive-by" and were very interested.

After viewing the house they said they didn't like the busy road because they have a cat and fear that it could get hit by a car. While that's totally reasonable, this should be said before the showing, not after the showing.

They were weird. We agreed that they were going to give me an answer within 24 hours. I didn't hear from him, so after 24 hours, I offered the house to someone else. They actually gave me the news 3 days after the viewing. It's weird that they think I was holding the house for them for multiple days with no communication from them.

A few months later the house was available for rent again. The guy contacted me again and asked to see the house. However, he didn't realize he already viewed the house. It seems like he is the type of person that doesn't pay much attention to details.

It's very odd to me he hadn't sorted his housing situation a few months later.

August, 2020 I was scrambling for a rental because I sold my house for cash, but a few months later I was not.......you know, because I locked that down.

Some areas are experiencing multiple offers for rentals. My tenants were hoping to find a bigger place but couldn't win a bid in 5 months of actively trying.

[Chris Pascale]

I scheduled a showing for a potential renter. Before I scheduled, I asked them to make sure that they were ok with the location. It's on a somewhat busy road, which can be a turn-off for some people. I encouraged them to do a "drive-by" and make sure they are ok with the busy road and overall location. They told me they did a "drive-by" and were very interested.

After viewing the house they said they didn't like the busy road because they have a cat and fear that it could get hit by a car. While that's totally reasonable, this should be said before the showing, not after the showing.

They were weird. We agreed that they were going to give me an answer within 24 hours. I didn't hear from him, so after 24 hours, I offered the house to someone else. They actually gave me the news 3 days after the viewing. It's weird that they think I was holding the house for them for multiple days with no communication from them.

A few months later the house was available for rent again. The guy contacted me again and asked to see the house. However, he didn't realize he already viewed the house. It seems like he is the type of person that doesn't pay much attention to details.

It's very odd to me he hadn't sorted his housing situation a few months later.

August, 2020 I was scrambling for a rental because I sold my house for cash, but a few months later I was not.......you know, because I locked that down.

Some areas are experiencing multiple offers for rentals. My tenants were hoping to find a bigger place but couldn't win a bid in 5 months of actively trying.

When we were breaking our lease, we found a renter right away. The landlord's realtor scared her into believing that only she could find a reliable person. A week later we had another couple - a doctor and an engineer - and the landlord agreed it would be okay.

[SimpleCycle]

Do you have a realtor?  Your realtor should know what is standard in your area.  In mine that would be a forfeit of the earnest money and I'm surprised they didn't come up with a more legitimate reason.  I one had a non-contractually covered reason for wanting out of a house contract.  There was a problem with the property that wouldn't let me get a conforming mortgage, but still allowed me to get financing.  That alone was not enough to break the contract and get my earnest money back, but it was a condo with like $4 in reserves so I was able to cite "insufficient condo reserves" as my reason and get the earnest money back.

[uniwelder]

Where I’m located, the earnest money would be forfeited, according to standard contract. The buyer knew the location so unless there were some details discovered, such as plans for additional lanes to be added to the road, I don’t see how they have a legitimate claim. Are you using a real estate agent? What are they suggesting you do?

Quoting myself here.  The responses so far have really intrigued me, so I talked with a real estate agent I know, and I suppose its very state dependent.  In Virginia, the deposit is held by the title agency or attorney, and to refund it to buyer or seller, both have to agree and sign for its release.  There are likely millions of dollars currently held indefinitely because buyer or seller won't sign and its not worth the expense to fight it in court to get a few thousand dollars in return. 

So in the case of OP, if laws there are like Virginia (a very big 'if'), they could very well simply refuse to refund the deposit.  OP probably wouldn't benefit, as it would be more for spite, unless they can get the buyer to split the difference and they both sign, or come to some other arrangement.

[clarkfan1979]

Where I’m located, the earnest money would be forfeited, according to standard contract. The buyer knew the location so unless there were some details discovered, such as plans for additional lanes to be added to the road, I don’t see how they have a legitimate claim. Are you using a real estate agent? What are they suggesting you do?

Quoting myself here.  The responses so far have really intrigued me, so I talked with a real estate agent I know, and I suppose its very state dependent.  In Virginia, the deposit is held by the title agency or attorney, and to refund it to buyer or seller, both have to agree and sign for its release.  There are likely millions of dollars currently held indefinitely because buyer or seller won't sign and its not worth the expense to fight it in court to get a few thousand dollars in return. 

So in the case of OP, if laws there are like Virginia (a very big 'if'), they could very well simply refuse to refund the deposit.  OP probably wouldn't benefit, as it would be more for spite, unless they can get the buyer to split the difference and they both sign, or come to some other arrangement.

In Colorado you can go to small claims court over the earnest money. This almost happened to me last year. I was under contract to purchase 10 acres of land in the mountains (35 minutes south of Breckenridge). The listing agent wasn't totally honest about the snowplowing. The listing said the snow was plowed by the HOA. However, the plowing stopped about 300-400 yards short of the driveway. Once I realized their listing was not accurate, I wanted out of the deal and my earnest money back. The listing agent and seller refused to give it back to me.

According to Colorado law, I couldn't go to small claims court after the seller because the seller was out of state. All I could do was wait for the title company to release funds to either party. My broker told me that 90% of the time they release the funds back to the buyer. If for some odd reason they give the money to the listing party (without your consent), then you can take the listing agent to small claims court, but only after they get the money. The broker said that based on the evidence, I would have a 90-95% chance of winning in small claims court.

After 60-90 days of the contract expiring, the title company refunded me my earnest money. Story over.

[scottish]

This is an interesting topic.   The provincial govt in British Columbia has announced that they are going to introduce new legislation to allow buyers to walk away for up to 7 days after signing with no conditions (or presumably 7 days after they waive conditions) with no consequences.    There doesn't seem to be any clear rationale for this change.   The housing market has been very hot in Vancouver for many years, so maybe the government wants to do something about it - and this qualifies as "something".

Linky:   https://www.cbc.ca/news/canada/british-columbia/bc-cooling-off-period-real-estate-1.6237774

[ditheca]

Thanks all for the responses.

Where I’m located, the earnest money would be forfeited, according to standard contract. The buyer knew the location so unless there were some details discovered, such as plans for additional lanes to be added to the road, I don’t see how they have a legitimate claim. Are you using a real estate agent? What are they suggesting you do?

My agent has bought and sold many houses, but has never contested an earnest money dispute. Based on the standard contract wording, I think a reasonable judge could go either way. Clearly the intent of the due diligence provision is to allow investigation into non-obvious issues with the property. The wording is sufficiently vague to allow argument.

The mind boggling thing is that the buyer had an infinite number of legitimate ways to cancel the contract, but instead gave us a terrible excuse. If I read between the lines correctly, they buyer's actually decided not to move to this city at all.

Code: [Select]

8.1 DUE DILIGENCE CONDITION. Buyer's obligation to purchase the Property: [x] IS [ ] IS NOT conditioned upon Buyer’s Due Diligence
as defined in this Section 8.1(a) below. This condition is referred to as the “Due Diligence Condition.” If checked in the affirmative, Sections 8.1(a)
through 8.1(c) apply; otherwise they do not.
(a) Due Diligence Items. Buyer’s Due Diligence shall consist of Buyer’s review and approval of the contents of the Seller Disclosures
referenced in Section 7, [color=blue]and any other tests, evaluations and verifications of the Property deemed necessary or appropriate by Buyer[/color], such as: the
physical condition of the Property; the existence of any hazardous substances, environmental issues or geologic conditions; the square footage or
acreage of the land and/or improvements; the condition of the roof, walls, and foundation; the condition of the plumbing, electrical, mechanical, heating
and air conditioning systems and fixtures; the condition of all appliances; the costs and availability of homeowners’ insurance and flood insurance, if
applicable; water source, availability and quality; the location of property lines; regulatory use restrictions or violations; fees for services such as HOA
dues, municipal services, and utility costs; convicted sex offenders residing in proximity to the Property; and any other matters deemed material to
Buyer in making a decision to purchase the Property. Unless otherwise provided in the REPC, all of Buyer’s Due Diligence shall be paid for by Buyer
and shall be conducted by individuals or entities of Buyer's choice. Seller agrees to cooperate with Buyer’s Due Diligence. Buyer agrees to pay for any
damage to the Property resulting from any such inspections or tests during the Due Diligence.
(b) Buyer’s Right to Cancel or Resolve Objections. If Buyer determines, in Buyer’s sole discretion, that the results of the Due
Diligence are unacceptable, Buyer may either: (i) no later than the Due Diligence Deadline referenced in Section 24(b), cancel the REPC by providing
written notice to Seller, whereupon the Earnest Money Deposit shall be released to Buyer without the requirement of further written authorization from
Seller; or (ii) no later than the Due Diligence Deadline referenced in Section 24(b), resolve in writing with Seller any objections Buyer has arising from
Buyer’s Due Diligence.


[Dr Kidstache]

It looks like you're in Utah & have the same contract wording as I did including "any matter deemed material to the Buyer in making a decision to purchase the Property". Who would try taking that to court in your case???  I really don't think there's an issue with the buyers backing out because they don't like the location. Places are going in and out of contract here constantly and my agent says that it's because the market is so difficult and buyers are just throwing offers out remotely and then sort things out during the due diligence period.
It's a bonkers sellers market everywhere in Utah, no? It's not clear to me why the buyers backing out is such a big deal since it was during the due diligence period. Is there something about your place that makes it undesirable even in this market?

[Omy]

Thanks for including the wording of the due diligence clause. This looks like a "Get Out of Jail Free" card for the buyer. Buyer can get out of the contract for any reason during this period and earnest money will be returned to Buyer.

"...and any other matters deemed material to
Buyer in making a decision to purchase the Property."

"If Buyer determines, in Buyer’s sole discretion, that the results of the Due Diligence are unacceptable"

"Buyer may either ...cancel the REPC by providing
written notice to Seller, whereupon the Earnest Money Deposit shall be released to Buyer without the requirement of further written authorization from Seller"

[goodmoneygoodlife]

Yeah 'any' 'deemed material' pretty much means they can back out if the wind blows the wrong way.

It's like a tradeoff of attracting potential buyers vs. having serious leads.

You might wanna consider restricting the wording to only include repair / financial contingencies. Otherwise, anyone can make a bid and troll you for a whole month.

[scottish]

A month is a long time.   I think those are usually closer to a week aren't they?