Legal Question in Real Estate Law in California
Buyer cancels contract and can't get back deposit.
I represent a buyer in So Cal; we have ''active removal'' of contingencies. Due to limited inventory, my clients agreed to purchase a home for $490,000 even after it appraised at $442,000. Seller wouldn't reduce and said no to requested repairs; they still wanted to buy.
A week before closing, my clients began talking about mold (there were moisture related repairs that seller wouldn't do.) They decided to cancel and wanted their deposit because acause there had never been a removal of any contingencies. The quirk is that seller had moved out and the house was currently being tented for fumigation.
Seller is ticked, but already has the property in escrow again, apparently at a higher price (yes, it is crazy here), yet refuses to release the deposit. Both parties agreed to mandatory arbitration in the contract but the deposit is $5,000. If my clients sue seller in small claims court, can they file a lis pendance or do something else to hold up seller's current escrow in order to ''encourage'' her to release the deposit?
4 Answers from Attorneys
Re: Buyer cancels contract and can't get back deposit.
Since your buyer does not want to acquire the property, filing a lis pendens (Notice of Pending Action) is not proper. This is used only when title to real property is at issue. Your dispute is only over money.
If the seller can show damages (e.g., he lost the sale and had to sell later at a lower price) your buyer might face a counter-suit for abuse of process.
Re: Buyer cancels contract and can't get back deposit.
If your client is not within the terms of the contract, and files suit, and looses, he could be in more problems. The contract is written for the protection of the buyers, but if they do not act within the terms, that is their problem.
By the way, I am assuming that the liquidated damages clause is checked. If it wasn't initialed, then the seller must prove his damages in order to retain the deposit. Since he is selling the property for more, there are no damages.
Re: Buyer cancels contract and can't get back deposit.
Filing a lis pendens that might cause the seller to lose the higher-price sale would be a disaster for your client. Not only is a lis pendens inproper in a dispute over money rather than title or possession of real property, but also your client would be liable for its consequences on the would-be seller. It's called "slander of title."
Re: Buyer cancels contract and can't get back deposit.
Not sure the basis for your buyer to receive funds back. If liquidated damages clause checked and $5,000.00 agreed as amount or more, can't see basis for getting it back. Also, if mediation and/or arbitration clauses checked and your client must pursue this matter through mediation and/or arbitration.
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