An act of bad faith?

Asked by Ernest Escrow, Rocklin, CA Mon Dec 1, 2008

About 6 weeks ago we went to the closing table with a large check in hand to sell our property. We signed and delivered the funds to escrow. The buyers failed to close. The buyers did not like the terms of their mortgage and did not close. The loan they refused was funded. We then allowed them a written extension to close. We also allowed them to move in with a year lease (lease with an option to purchase that can only be exercised in 2008). They have been making monthly rent payments under the lease. We understand that they are again approved for a mortgage (ironically, the same one as before and at a better interest rate). Now we hear they don't like the terms of this (same) loan either and want to explore different lenders just a couple of weeks before their extension expires. Does the buyers actions sound like bad faith in your experience?

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5
James Joseph, , 06281
Mon Dec 29, 2008
Hi Ernest,

You may be able to keep their deposit and or go after any damages you have suffered. Check out your contract and either hire an attorney or start to get a bit aggressive (not to much) with these buyers. It sounds like you have been more than fair and they need to perform.

All the Best,

James Joseph
0 votes
., , Los Angeles, CA
Mon Dec 29, 2008
A sign of the times. Seller comes into escrow with a big check to SELL theri home. So....ahhh....Okay.

Contingencies are what will prevail here. A financing condition will prevail in the argument to force a liquidated damages action. (see an attorney for sure) But the contingency must be specific as to a buyer and prevailing market rate suitable to the credit profle. Tough. admin@borrowerhotline.com (not an attorney and not offered as legal advise. Always see an attorney where questions exist as to your rights as a consumer)
0 votes
Ernest Escrow, Home Seller, Rocklin, CA
Tue Dec 2, 2008
The buyers are leasing the property and have an option to purchase, so they are in possession of the property for the next 10 months at 100% of what we pay on the first and second purchase money mortgages (but not all of the PITI, we're still out of pocket on the taxes and insurance). If they skipped out--we would pursue and use all legal options to collect a judgment. They are employed in a professional field and have equity in a home in another state as well as other assets and ongoing professional practices. They signed the lease when they failed to close about 6 weeks ago and needed a place to live. They failed to close as said that they did not like the loan terms at that time. We gave them a break. We had another lease on the property when they made the original offer and displaced that tenant to accommodate the buyers.

In addition to the lease, they also have a separate contract to purchase the property with us. The broker holds the good faith deposit. The have an extension on the contract on the contract to purchase is until mid-December. We understood, as of several weeks ago that they would be closing before the option under the lease and the separate extension on the P&S agreement ran out. Now they are working with the same lender, the same mortgage but at a better interest rate. I understand that they have another mortgage available to them through this lender. They now say that they want to find another lender and a better loan. Seems to me to be an act of bad faith. We have incurred expenses as a result of their delays and of course we have performed in every regard.

We think that looking for another loan just a couple of weeks before the third extension runs is an act of bad faith. Do you agree? We have conversed with several attorneys who all say it is and say that we should have the good faith deposit as liquidated damages (and others say we should assert that the liquidated damages are inadequate and we should seek to collect not only the good faith deposit but an additional judgment) if they fail to close by the extension and of course, the lease would be maintained as a separate agreement.

We are not trying to take advantage of anyone but are trying to protect our own interests. What do you Trulia real estate viewers think? Are we being to harsh or do you think that we're justified? To what extent? What have you seen and what would you do?
0 votes
The Hagley G…, Agent, Pleasanton, CA
Mon Dec 1, 2008
Sounds like you have an unmotivated buyer...plus...you've made it too easy for them. What happens if they walk? Is there a good faith deposit that you get to keep?
Web Reference:  http://www.cindihagley.com
0 votes
David, , La Jolla, CA
Mon Dec 1, 2008
Never fails.. you stick your neck out for somebody and now they jerking you around. If I were a betting man, they are not really approved for the loan and still shopping.

The way loan programs change so fast these days leaves agents and buyers with their head spinning...

None the less, was the I/O contingent on the deal closing? If so, you have options. Since they are paying the rent, thats a good thing but if it turns out they dont qualify or "dont like the terms" and decide not to pay rent to you... they have a minimum of 6 months of non payments if you decide to evict them.

Put the house back on the market subject to cancellation of current escrow is another option. However, you need the tenants permision to allow people in to view property. In the lease it would stipulate if you can do this.

It will take most lenders 21 days to recieve a package go thru underwriting, get UW Conditions etc... and then get docs out...

Its not as bleak as it seems thou...
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