Legal Question in Real Estate Law in California
we are sellers in a 60 day escrow. buyers failed to remove contingencies relating to a 10 day inspetion period, and ignored the notice to perform. they had trouble getting financing because the deal is for a house on acreage and an adjacent parcel and the appraiser only appraised the parcel with the house not including the additional (subdivided) acreage and the lender won't lend on the raw land. We offered to pay to have another appraisal, but that was declined. so we lowered the price by $26,000 based on what the buyers said they could offord., then about a week later they decided to back out of buying the raw land. So almost 40 days into the 60 day escrow we cancelled the contract due to the buyres continuous bad faith. Our agent is telling us unless the buyers agree to release the deposit to us they can take us to small claims court..i think we are justified in the cancellation and are entitled to the good faith money since they refused to perform, ignored the notice to perform, and backed out of half the deal so far into the escrow after all we did to make the sale go through... i know anyone can try to sue anyone for anything these days..but what is a " good faith deposit" for if not to compensate a seller for taking thier house off the market for 40 days while a buyer messes around then backs out?
1 Answer from Attorneys
Unfortunately, you are the one who decided to cancel, which gives them an initial presumption of a right to their deposit back. When you didn't pull the plug based on them ignoring the notice to perform on the inspection contingency, you gave them an out under the appraisal or financing contingencies. They are not obligated to modify the deal, even in their favor, if they cannot get the appraisal value and/or financing provided for in the contract. By backing out of the land part of the deal, you may have a case that they breached the contract which would entitle you to the deposit. The bottom line though is that you have nowhere near a slam dunk case, and your agent should have been doing a better job of dotting i's and crossing t's to document exactly who was or was not performing under the contract. Most likely it would have been much better to wait for them to fail to close escrow if you wanted to keep the deposit.
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