We were buying a house but we found the seller did not disclose everything. Now we have option to withdraw wit

Asked by Shashi Jain, Katy, TX Fri Sep 21, 2007

We were buying a house but we found the seller did not disclose everything. Now we have option to withdraw and get the earnest money back.
On other hand, we gave 1 month notice to our landlord. Our lease is over in a week. The owner is not willing to go for month to month lease. We will be searching for another house to buy asap.
Question is this if we can ask the seller who did not disclose everything and because of his wrong deed, we are in a mess.
Can we ask for compensation for all the inconveniences. We do not know where are we going in a week.
My children have also booked their flights and they will be here no matter what.
Closing of the house on sept. 27 is cancelled. We still need to do the required paper work.
What should be our next step to recover from the seller?

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11
Patti Pereyra, , Chicago, IL
Fri Sep 21, 2007
DISCLAIMER: I am not a real estate attorney. My main advise would be to talk to yours as soon as possible.

Now, onto my answer:

Ooh, this is sticky.

Let's say you did attempt to sue for damages -- would you be able to prove that the seller purposefully withheld information?

Because the burden of proof would be on you, and your wallet.

And the outcome may not be in your favor, and it wouldn't likely happen overnight, which would mean more time and money lost for you.

My advise would be to put your things in storage and find temporary housing (there are affordable corporate housing options that your Realtor can look into for you), because you don't want to make the mistake of rushing into a purchase. After all, let's say you did find something else quickly -- would you be able to get a loan funded in a timely manner? The last thing you would want is to then BE the cause of a default due to inability to meet financing contingencies!

It's a shame and a pain in the you-know-what that this has happened, I'm sorry.
1 vote
Paul Slaybau…, Agent, Scottsdale, AZ
Fri Sep 21, 2007
I'm not an attorney, but I don't think that is anything worth pursuing. You've already exercised your right to terminate the contract, and I can't see the seller being responsible for additional damages. As it stands, with no agreement in place, the seller certainly won't offer you anything. You would have to pursue the matter legally. From where I sit, I don't like your chances of success either. It sounds like the seller was certainly in the wrong and you were put in a bad position, but I would expect a court to find that the liabilty of the seller is limited to the actual transaction, not circumstances that arise outside of the transaction. Again, though, I cannot stress enough that this is merely a Realtor's opinion - not legal advice.
1 vote
Brian Eddins, Agent, Norman, OK
Fri Oct 19, 2007
You can definately get out of the contract and get your earnest money back. this is kinda a grey area, I recomend talking with a real estate attorney to see if you can recieve any damages from the seller. good luck.
0 votes
Perry Hender…, Agent, Austin, TX
Tue Sep 25, 2007
You must do the following to terminate and move on. 1. Put your head in a place of successful thinking and a confident attitude 2. Execute or have your realtor execute a termination of contract.(its a standard form 3. Know that when you do this, everything is ok becuase there is lots of houses on the market dying to find you. 4. Talk to your lawyer to determine if any legal ramifications exist. 5. discuss the value of you staying in your current home. It's better to have some rent coming in than a vacant house.

Good luck on the search
0 votes
Deborah Madey, Agent, Brick, NJ
Sat Sep 22, 2007
You state you have the oppty to withdraw, but have not filed paperwork. From that, I assume that you are still under contract.

If this contract falls through, the buying public will ask the reason for the fall through and it can be reasonably expected that the next contract this seller receives will be for a lower amount as a result.

It may be in the sellers best interest, as well as yours to negotiate adjustments to the current contract rather than walk away.

Since I am not privy to details, and you have not disclosed the nature of the information not disclosed, it would be impossible for me to make a clear assertion here. I do suggest that you look into further a possibility of contract adjustment as one course to take.

In the contract fall throughs that I have seen, I am not accustomed to seeing additional compensation paid beyond the deposit monies. While it could happen, it just isn’t something I have routinely seen. Unless the seller willingly agrees, you will have to decide if the pursuit of compensation warrants the investment in legal fees and time. Any pursuit of additional compensation might also impact the release of your deposit monies until final settlement of the terms are reached.

The above is not legal advice, and only the opinion of a Realtor.
0 votes
Sylvia Barry,…, Agent, Marin, CA
Fri Sep 21, 2007
You are right, Paul, we have the same thing in California, where the buyer has an automatic 5 days inspection extention if there are fineings due to the none or late disclosure by the sellers. Sorry for missing that point.

I am also going to assume that this is a problme big enough that Shashi does not want continue with the contact.

This is all irrelevant on what Shashi is asking, compensation from the sellers for the inconbeniences that the sellers caused; and of course, he won't know what he will get until he either asks the sellers or he goes to court for it, and that just might not be worth it.
0 votes
Ute Ferdig, Agent, Newcastle, CA
Fri Sep 21, 2007
Paul. Thank you for pointing this out. Fraud (failure to disclose a material fact) in my opinion is always grounds for cancellation no matter whether it's discovered during or after the inspection period. However, unless the fraud is obvious, it may be difficult to prove. If the court ultimately does not find that a fraud was committed, the buyer will lose the deposit if cancelled solely based on fraud and had no other contingencies left to back out. I still think the best route would be to try to get a price reduction or repairs from the seller and salvage the contract unless the defect are so severe that curing is not a viable option.
In the end, the seller will have to disclose to the next buyer what was discovered and if it's serious the next buyer will want it repaired or pay less.
Web Reference:  http://www.go2kw.com
0 votes
Paul Slaybau…, Agent, Scottsdale, AZ
Fri Sep 21, 2007
One thing for everyone to keep in mind. It most likely does not matter if the defects were discovered during or after the inspection period. A seller who breaches the contract by failing to disclose latent defects is not saved by the bell, so to speak, when the due dilligence period ends. In my area, and I would assume in most others, discovery of nondisclosure of a material fact by either party can result in cancellation of the contract and pursuit of the earnest money throughout the entire course of the escrow period. Being limited to a defined time period to physically inspect the property (and make repair demands) is one thing. Discovery of nondisclosure is a whole new ballgame. So while Shashi should sit down with his agent to review the terms of the contract to ensure that he is entitled to a full return of the earnest money, this type of issue is not necessarily tied to the inspection period. One thing to be cognizant of would be the timeframe allowed to submit a notice of cancelation upon obtaining the objectionable information. In AZ, a buyer has 5 days from the discovery of a material fact to notify the seller, in writing, of intention to terminate the agreement. I would make sure that any such time constraint is adhered to strictly.
0 votes
Patti Pereyra, , Chicago, IL
Fri Sep 21, 2007
If the closing was set for 9/27 and he just found this out, it seems unlikely he was still in the inspection period...?

Shashi, Sylvia raises a good point. Can you give us more info? My answer didn't consider that possibility.
0 votes
Sylvia Barry,…, Agent, Marin, CA
Fri Sep 21, 2007
Hi Shashi:

I am with Paul, I don’t quite know if you can get compensated for this.

From what I see, you are in the inspection period, and you found something the sellers did not disclose and now you are canceling the contract. Normally, this will be it, you cannel the contract and you get your earnest money back and the sellers and you part ways.

Your predicament is that you have already given notice to your landlord, and you have booked flights for your kids to come, probably to celebrate the closing with you, so you want to be compensated for all the trouble and for seller’s dishonest and the cost you have incurred.

The question I have is why would you do all that when you have not removed all contingencies? I never commend my clients to do that until all contingencies are removed.

The only way you can get compensated is probably by taking the sellers to court, but you are not guaranteed to win (or slim chance), so unless you have really good reason, you might not be able to get any compensation and could potentially waste a lot of time and could also incurred lawyer fee / expense.

Best,
Sylvia
0 votes
Ute Ferdig, Agent, Newcastle, CA
Fri Sep 21, 2007
Hi Shashi. It sounds like you have not yet officially withdrawn from the contract. I understand closing was cancelled, but that's not the same as cancelling the agreement.

Since you don't mention what the seller did not disclose, it's difficult to assess whether it would make sense for you to renegotiate the terms of the contract to cure the things that you discovered. Perhaps you could come back and post an answer on this thread telling us more details about what the seller failed to disclose.

If you end up cancelling the contract, there's no absolute guarantee that you will get your deposit money back right away as the seller has to agree to the release of the funds. A dispute about your entitlement to the deposit could arise or the seller could just refuse to agree to the return of the deposit. If that happens, you may have to sue to get the money back.

Now to your question about what you can ask for in terms of compensation for all the inconvenience caused by the seller's failure to disclose. This is a legal question and you should ask an attorney. I can only tell you that you won't see any money soon if you have to sue the seller for consequential damages. Unless your damages are sufficiently high, it doubt that it would warrant the legal fees and the headache of a lawsuit.

In summary, I would carefully consider ways to save this contract. I understand that you are upset about the seller not disclosing everything, but you have to keep your emotions out of it. Are you absolutely sure that you could prove that the seller even knew about those things that you think the seller should have disclosed? If you were to sue for damages, you'd have to prove that they knew.

Right now you have to do what's best for you. If you feel that canceling the contract is what you need to do, I hope that you'll get your deposit back promptly so that you can use it as a deposit for the next house.

Best of luck to you.
Web Reference:  http://www.go2kw.com
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