Profile picture for user60501488

Can you be sued if you back out of a deal?

I made a offer on this condo but I decided to back off due to complicated family issues; I am pretty much forfeiting my Ernest Money (1% of asking price) but I am hearing from my agent that the seller is considering suing...
Is he just bluffing or does he have a case or ...?
I appreciate your responses.
  • May 30 2013 - Houston
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Answers (11)

Profile picture for Texas Saint

User 1598751 is wrong (and Naimi Sumner is right) about specific performance.  Paragraph 15 (DEFAULT) of the TREC-promulgated contract states the following:  "If Buyer fails to comply with this contract, Buyer will be in default, and Seller may (a) enforce specific performance, seek such other relief as may be provided by law, or both or (b) terminate this contract and receive the earnest money as liquidated damages, thereby releasing both parties from this contract."

In the DAMAGES section (18D), "Any party who wrongfully fails or refuses to sign a release acceptable to the escrow agent within 7 days of receipt of request will be liable to the other party for liquidated damages in an amount equal to the sum of: (I) three times the amount of the earnest money; (ii) the earnest money; (iii) reasonable attorney's fees; and (iv) all costs of suit.



  • May 04
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Profile picture for user1598751
depends on what your purchase contract says. In many cases, states, it is written up so that the earnest money serves as liquidated damages; Thus you would lose your earnest money.

naima sumner is wrong about specific performance; specific performance is used by a BUYER, to force the seller to sell the home.

A seller, if they chose to and are allowed to, will sue for monetary damages. 
  • June 01 2013
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So you are out of the option period and you decided you don't want the condo anymore, the seller can enforce specific performance if you don't have grounds for termination.  This is just a practical remark and in no way is to be construed as legal advice.

Does your family situation stop you from getting a loan?
You do have a binding contract and the earnest money alone sometimes isn't sufficient for a seller to just let a buyer off the hook.  It's an emotional decision and they feel like you wasted their time for weeks taking their condo off the market, possibly became a stale listing, and they get angry.

May be offering additional compensation to the seller will help?  Get your agent to speak to their agent (hopefully they have a good relationship) and explain your point of view.

Your contract very likely calls for mediation too, which is much cheaper than alternative dispute resolutions.  Read your contract paragraph on "Default" and the one below it "Mediation".

Our market in DFW has rebounded a lot but not for condos, they are still a bad investment.

I wish you luck and hope you get an amicable result.

Naima
  • June 01 2013
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Profile picture for blue screen exile
It is normal for the buyer's agent to be "freaking out" if their client is "backing out"...  they are the one that is going to suffer a loss of reputation, as one whose offers "fall through" for no apparent reason.  They are the ones that put in hundreds of hours of work, and then get paid "nothing".

Yes, the seller has a loss too... many extra "days" that they need to have the house ready for showing and transaction... days that could have been used for something else; days that they could have been working on their "new home"...  Unlikely that they can sue and get much of a settlement; but they have a right to sue if their contract doesn't say "mediation", or "arbitration".  And of course they could take it to mediation if they wanted to.

But the seller's loss is no where as severe as your agent's loss, and your agent is not going to sue you.
  • May 30 2013
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Your purchase contract will prevail...what does it say on backing out?
  • May 30 2013
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Profile picture for user60501488
Rebecca, aside from waiting about 20 days, nothing really.
That was my point too, that a lawsuit should be based on monetary damage. But my agent is freaking out.
  • May 30 2013
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You need to read your Purchase Contract carefully. In California we have a Liquidated Damages Clause, which when initialed by all parties, limits damages to the actual earnest money deposit up to 3% of purchase price.

If in doubt, talk to your agent. You may need to consult a real estate attorney.
  • May 30 2013
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Profile picture for HighDesertAgent
What are the damages to the seller?  Forfeiting your earnest money is normally all that would happen.  Seller would have to prove damages in order to sue.  What would he sue for?
  • May 30 2013
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Profile picture for user1598751
shawn said something utterly wrong that needs to be corrected:

the "if you stop working on your loan... you should be declined financing... and can possibly terminate that way" 

The financing contingency only applies if you TRY to get the loan and are denied, despite a faithful effort on your part. 

It is very disturbing to see such ignorant advice from an agent. 
  • May 30 2013
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Profile picture for user60501488
Shawn, yes it was passed option period. Let me see if I understand this, if he is "really" planning to sue, he should take his house off the market, correct?
And you are right about the market, especially here in Houston.
  • May 30 2013
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Profile picture for Shawn Owens
It depends on the situation. You are past the option period I presume. Did you tell them the reason you are terminating? If you stop working on your loan paperwork(if you're obtaining a mortgage) you should be declined financing and can possibly terminate that way if you are still within the period outlined in your financing addendum. If you are using TREC promulgated forms it is very likely that you agreed to Mediation. Most likely, he will do nothing. In this market, the home should sell very quickly anyway and it should not be worth the seller's time to pursue this. When in doubt, contact an attorney. Best of luck to you!
  • May 30 2013
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