Tag Archives: buyers-remorse

Date My House – Saturday on TLC

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date my house 1Yesterday I had the opportunity to interview Bob Guiney and Nadia Geller about the upcoming premier of “Date My House” airing this Saturday, April 5th at 8:30 p.m. on TLC.

Bachelor BobSome of you may remember Bob as “Bachelor Bob” who after not getting a rose from Trista on The Bachelorette, went on to star in the 4th episode of the 1st season of The Bachelor. I expect “Date My House” to be a fun watch.

I’m a little disappointed that the thrust of the show seems to come from the standpoint of helping poor, Desperate Sellers get someone to buy their house. Seems this was a great opportunity for the focus to turn more on buyers of homes being able to check out their future home more thoroughly. During the hot real estate market, too many people bought homes so quickly that they really didn’t have a chance to get to know the home they were buying. As consequence, we are starting to see some lawsuits popping up about the REALTOR Owner/Seller’s lack of disclosure about the Obscenity Screaming; Potato Throwing Neighbors, and buyer remorse suits blaming their agents for having paid too much for their home.

Instead the show appears to be built around a homeowner being so desperate to sell, that they are inviting people in for a longer “first date” to get to know the house better and “fall in love” with it. Did the buyers get to spend the night? Bob and I had a chuckle over the chances of the 12 buyers getting to sleep over by end of season filming being about the same as the odds of a guy getting to sleep over on a first date. A few did…but most didn’t.

As a buyer, would you appreciate an owner inviting you to hang out at their home for a long period of time? Would you appreciate the opportunity to have a party there for your friends to get their opinion? Have a sleepover? Spend a week maybe? Or would you view that as an act of desperation and say, I don’t want to buy a house where the owner is that desperate. Does a car salesman offer you a test drive in the hope you won’t want to get out from behind the wheel and back into your beat up Chevy? Would you be afraid to spend the night at a home for sale for fear that going back home afterward would be such a let down, that you would be tempted to buy the house?

Maybe you want to see the show first. But let us know. Do you see dating a house as a viable option for buyers and sellers in the future?

Having second thoughts about that High-End Condo presale?

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As with any blog, this is not legal advice. If you want legal advice, consult an attorney in your area.

Escala. 1521 second avenue. Olive 8. Just a few of the many luxury, high-end condominiums going up in the Emerald City. Needless to say, when its “designed exclusively for the confident few,” you can be sure there will be a stiff price of admission. Indeed, these developers not only charge a high price, they also typically require a substantial earnest money deposit, usually 5% of the purchase price. On a million dollar condo, thats $50k. You’ll pony up this sum months, and even years, before the condo is complete and ready to close.

So what happens if you change your mind between the time you signed the presale contract and when the closing date approaches? What happens if the market goes in the tank and you want out of the deal? Or you foolishly went long on a can’t-miss investment opportunity, and now you’re not so sure you’re one of the “confident few”? Can you get your money back?

The short answer is “no.” Developers typically structure their contracts so that the earnest money will be forfeited if the buyer does not close. Buyers backing out of the deal is every developer’s nightmare — they need to sell the units and move on to the next project. Accordingly, developers do everything they can to “lock in” a buyer.

That said, there are typically a few avenues of attack if you really want out of the deal. To determine whether you are really serious about getting out of the deal (versus typical “buyer’s remorse”), ask yourself: “What would be worse, buying this condo or losing my earnest money?” If buying the condo is the worst possible outcome, worse even than losing your earnest money, then you’re ready to head for the exits.

One fertile area of inquiry is the Public Offering Statement (POS). By law, the seller of a new condo must provide the buyer with POS, which contains a variety of information about the condo development. Upon receipt, the buyer has a 7 day right of rescission and can therefore rescind the contract within that period with a full return of the earnest money. The seller must also provide the buyer with “all material amendments” to the POS, and upon receipt the buyer has another right of rescission if the “purchaser would have that right under generally applicable legal principles.”

Therein lies the rub, of course. These “generally applicable legal principles” are not spelled out in the statute, so it is a bit of an open question as to the extent of a change in the POS (between when provided to the buyer initially and when finalized) that gives rise to another right of rescission. Regardless, however, it creates an arguable point with attendant risk to all parties if they are unable to voluntarily resolve the dispute. Since every POS changes between the initial, presale version and the final version, a buyer can usually use these changes to negotiate at least a partial return of the earnest money.

There are other “arguable points” as well, all of which can lead to a negotiated resolution and a return of at least some of the money. Many developers are apparently unaware of the Interstate Land Sales Disclosure Act, a federal law that applies to large-scale developments. This statute has several requirements, including a disclosure requirement similar to the POS. If the seller fails to abide by the requirements of this federal statute, the buyer may have a right of rescission. There are many exceptions to this statue, but as long as there is some doubt, it will assist the buyer in negotiating a resolution.

In the final analysis, it is probably worth it to hire an attorney if there is a substantial amount of earnest money at issue (almost guaranteed if you’re talking about a luxury condo). The attorney will be able to identify those legal issues that can be used to negotiate a resolution. In doing so, you will probably get some of your earnest money back, and that total will probably be more than what you spent on attorney’s fees.

Buyer's remorse

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We’ve all been there: we’ve signed up for a major purchase when we think, “Wait a sec — was that REALLY a good idea?”  Given the costs associated with the purchase of a home, this moment of doubt can be downright crippling when it occurs after you’ve signed a purchase and sale agreement (PSA).  Usually, we get over it and press ahead with the purchase.  But what if you don’t — what if you really want to back out of the deal?

Most people in this situation will turn to their agent for advice.  Before you do so, however, recognize two facts.  First, you’re hoping to avoid a legal obligation without incurring liability.  The analysis of your situation — i.e. a determination of whether and how you can avoid your legal obligation — constitutes the practice of law.  Your agent, though, is almost certainly not a lawyer.  Second, your agent has an interest in seeing you go through with the purchase, as your agent only gets paid for his or her efforts if the deal closes.  Many agents — and certainly those who contribute to RCG — recognize that the interests of the client are paramount, and they would not permit their own self interest to interfere with the service and guidance they provide to their clients.  There are, however, other agents who, whether consciously or subconsciously, will allow their own self interest to influence the advice they give.

On the other hand, legal counsel can be expensive.  In most instances, the PSA indicates that, upon buyer’s default, the seller’s sole remedy is to retain the earnest money.  If that’s not the case in your situation, and if your agent did not bring this option to your attention before you signed the offer, then you may have a claim against your agent for negligent representation.  However, assuming you have so limited your liability, you should compare the cost of hiring a lawyer to the amount you stand to lose under the PSA.  If you put up $1000 in earnest money, then you can walk away from the deal relatively pain-free, and there may be no need for legal advice.  If you put up something more significant, however, it is probably worth at least consulting an attorney so that you can identify your options.

Typically, every PSA contains one or more contingencies.  Common contingencies include financing, inspection, and title.  If one or more of these contingencies remain open (i.e. neither waived nor satisfied), then you may have an easy way out.  If some of these contingencies at least arguably were not satisfied (e.g. a letter from the lender indicating that you did not qualify for financing, but which does not satisfy the specific requirements as spelled out in the PSA), then you at least have a position from which you can negotiate. 

There may be other factors that give you some leverage over negotiations for the return of your earnest money.  For example, I helped clients who rescinded a PSA for a newly constructed home.  Their agent was the “designated buyer’s agent” for the development.  This agent provided remarkably poor representation.  Even though my clients had a weak argument, at best, that they were entitled to the earnest money, they had a fairly good claim against their agent.  So, in my demand letter, I pointed out that, if the matter went to court, my clients would assert claims against this agent and would explore the relationship between that agent and the developer.  Apparently, the developer decided that this was not a battle worth fighting, and it returned all of the earnest money, a substantial sum.

Ultimately, a call or letter from an attorney carries signficantly more weight than from the buyer or the buyer’s agent.  If you want out of a contract and you want to avoid liability for doing so, it’s probably worthwhile to consult an attorney.

This post does not constitute legal advice or counsel.  Consult an attorney about the particular facts of your situation.