Home Selling in Brentwood>Question Details

Nigel, Home Seller in Brentwood, CA

Liquidated Damages, How much can I get?

Asked by Nigel, Brentwood, CA Sat Oct 20, 2007

Deposit how much can i get?
I had my property listed in Northern CA (BRentwood) and a buyer put in an offer and per contract deposit was suppose to be $32k. The buyer only placed $1000 in escrow. The buyer then removed all contingencies but then after doing so couldnt get their loan so buyer backed out of the deal...can I now go sue for the full deposit that was supposed to be placed in escrow even though the buyer never deposited the full amount? Buyer breached the contract so I feel that I should get what they promised they were going to deposit because now I am stuck in a deal for another property and will loose my deposit because they backed out....I am somewhat mad at my agent as well because she didnt write up my offer as contingent upon my old home selling.

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Just the $1,000 -- On page 5, Paragraph 16 of the CA Residential Purcahse Agreement explains that if buyer intends to occupy a dwelling with no more than 4 units liquidated damages are the lower of the 1. the deposit actually paid OR 3% of the purchase price.
2 votes Thank Flag Link Sat Oct 20, 2007
Jim Walker, Real Estate Pro in Carmichael, CA
MVP'08
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Liquidated damages states that if the contract is broken by the buyer after the removal of "all" contingencies then the seller can retain the "initial" deposit up to 3% of the agreed upon purchase price. If the remaining $31,000.00 was a deposit at close and was not put into escrow before the breech, then you will only get what is in escrow. Also, if you both agreed to the standard arbitration clause, you would have to go to arbitration first before you can sue. This is why, when accepting an offer you want your realtor to get as much into the initial deposit as possible.
1 vote Thank Flag Link Sat Oct 20, 2007
Nigel
On the face of what you say it appears that the terms of the contract were not enforced. Normally it's the Listing Agent's role to make sure that the transaction moves forward per the contract (at least IMHO).

Check with a Real Estate Attorney regarding legal remedies. It is my understanding that if a contingency is not used (meaning if someone is supposed to perform an action, and does not) if the seller or their agent does not try to enforce the action, after the time frame lapses, the requirement is considered mute.

So in action that means (speaking for me) if I have a buyer that is not cooperating (they need to provide an additional deposit ten days after the opening of escrow), on Day 9 I send over a "Notice To Perform" signed by the seller, informing the buyer's agent that if the buyer does not submit the funds as agreed we will cancel the escrow.

Then if Day 10 at 5pm comes and not deposit, then we execute a cancellation of escrow. Normally if I was representing the seller I would not open escrow with less than 3% deposit at the time of offer acceptance. I would counter back stating that the buyer needs to provide a 3% deposit or it's not worth opening escrow (as you have learned) because there really is not pain for the buyer if they walk out on the transaction. It's three percent for a reason...
0 votes Thank Flag Link Mon Oct 22, 2007
Keith Sorem, Real Estate Pro in Glendale, CA
MVP'08
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The contract was written as follows: Initial Deposit was to be $32,750, Loan applications to be removed in 0 days, Verification of down payment within 0 days after acceptance, NO appraisal contingencies, and loan contingency removal within 0 days after acceptance.

Yet the entire time, only amount deposited was $1,000

So what happens had the buyer not deposited anything?
0 votes Thank Flag Link Mon Oct 22, 2007
Hi Nigel, why would you allow the deal to continue when only $1K was deposited in escrow instead of $32K. How was your contract written? Well, there was a reason why so little was placed in escrow and this should have drawn up red flags. Now, you have to see if its worth your time and effort to collect money that can take years to get. But because you will loose some money on the other end, I'd say you should place the blame on your agent for allowing you to remove contingencies on your new home while the entire $32K was not in escrow on the other and the other home did not close. Your in a sticky situtation and i suggest you consult with a real estate attorney for advice.
0 votes Thank Flag Link Sun Oct 21, 2007
Nigel, I can't blame you for being upset. I would question my agent if I were you- actually probably go to their broker- to ask why the rest of the deposit wasn't ever put into escrow. It is their job to make sure that whatever the contract calls for is done within the timeframe the contract spells out. The agent may not have acted correctly as your fiduciary. It's worth finding out. Why would contingencies have been removed when they were, if the whole amount outlined on the contract wasn't even in escrow? And why wasn't escrow making you aware of this? There are a lot of questions here- which need to be answered first and foremost by those who were "protecting" you- the agent and broker.
0 votes Thank Flag Link Sat Oct 20, 2007
Was you liquidated damage clause initialed by both parties? If so the max would be 3% or the deposit whichever is the lesser. There are many more questions here. Was the deposit to be increased at the time of contingency removal? and it was not done? if that is the case an additional liquidated damage clause would have to be signed for the remainder of the deposit. I would have my contract in hand and talk with the Realtor/Broker who represented you and maybe a good real estate attoryney.
0 votes Thank Flag Link Sat Oct 20, 2007
Pam Winterba…, Real Estate Pro in San Ramon, CA
MVP'08
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Somewhere along the way the money that was suppose to be placed into Escrow never got there. It should have been placed before the contingencies where removed. Since all that was deposited was 1k then 1k is all you can get. With one little caveat. If they do not pay you the 1k quickly according to your contract you can get another 1k.
You should be upset based on what you are telling me.
0 votes Thank Flag Link Sat Oct 20, 2007
One more thing...if someone is only coming in with $1,000.00 that buyer may not have a full loan commitment from the lender. As was the case in your contract. This should be a big red flag in the future.
0 votes Thank Flag Link Sat Oct 20, 2007
It is not worth the trouble to spend $10,000.00 minimum, all the hassle, maybe get a judgement, then fight another 2 yrs to maybe get your money...I would just get a more competent agent who does what you ask the first time, and verify the funds are deposited as you requested.
Web Reference: http://www.iansellsnola.com
0 votes Thank Flag Link Sat Oct 20, 2007
You need to speak with your agent & perhaps the broker before moving forward. If you're in a slow market, this may have been your best (only) prospect. Why didn't the buyer ever put in the full deposit? Was this 0-5% down? If so, buyer just may not have cash. So even if you're right, you may not be able to collect, even if you go thru mediation/arbitration. If you got a judgment for the deposit but buyer has no means to pay, that means no money to you. Sounds like you need to have a heart to heart with your agent.
Web Reference: http://michellejudycarr.com
0 votes Thank Flag Link Sat Oct 20, 2007
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