Legal Question in Real Estate Law in Pennsylvania
About 1 year ago, my sisters and myself planned to sell my deceased mother�s house privately. About 9 months ago we had a interested buyer who agreed verbally to the price of $126,000.00. We stayed with this potential buyer through a 9 months period, being told by the buyer that he really wanted the house and was checking on financing. This went on for 9 months. He informed us he had the financing approved but then decided to cash in his stocks and bonds and pay cash for the house. Both us the seller and buyer agreed to see a real estate lawyer who would set up the settlement for both of us.
The real estate lawyer established all the paper work and asked the buyer to provide a down payment check in the amount of $1,000.00. He did this. We the sellers signed the real estate contract and the buyer went into the lawyer and signed the contract.
A day of settlement was decided. We the sellers went into the lawyers to settle and then the buyer came into the lawyers and stated he was not going to buy the house. No reason given. He also told the lawyer the check he wrote out would probably bounce. Apparently he has been known to write checks out on closed accounts. Apparently the $1,000.00 check was written by him knowing he closed the account months before hand. He walked out of the office and we all just sat there wondering what just happened.
The lawyer contacted his lawyer and told him about the lack of settlement. His lawyer apparently contacted him and told him he must settle because he signed a legal, binding document. He did not do this. He did not take his lawyer�s advice.
Our lawyer told us to go and try to sale the house and then we could sue him for difference in price along with other damages.
So.. we just sold the house after 4 months from the previous settlement with the first buyer. He had to take considerable less money for the house because the expenses we incurred during the 4 months was getting to us since we already had our own home expenses. We had property taxes, liability insurance, utilities to pay on this house over a 4 month period.
We would like to know can we sue this buyer. We had to settle selling the house for $118,000.00 with $3,000.00 going as seller assist to the new buyer. This would make our actual return for the house to be $115,000.00. This is $11,000.00 lost we incurred due to the previous buyer defaulting on the real estate contract.
Can you give us some guidance on what to do next? We do plan to talk to our real estate lawyer but I just wanted to check with on line lawyers.
Do we have a good case against this guy? This whole ordeal has been quite frustrating for us.
2 Answers from Attorneys
You may have a rock solid case against the buyer and even if you do it won't matter much if the first buyer can pay the judgment. In short you probably can win but the issue is can you collect. That said who else might be responsible and do they have money. Why wasn't the $1000 check cashed and put in an escrow account. Before going to settle?
{John}
I agree with the answer the previous attorney gave you - Why didn't your attorney deposit the prospective buyer's "good faith deposit" (if that was the intended purpose of the check).
More importantly, you and the prospective buyer should have signed an Agreement of Sale from the very beginning and taken a check equal to 10% of the purchase price which you would have been refunded to him if he was unsuccessful in obtaining financing within, say 60 days. You would have given the check to your Attorney to be deposited immediately in an escrow account and you would have been able to determine if the buyer was serious or not.
Unless a prospective buyer has been pre-qualified by a lender for a mortgage loan because of his relationship with the lender and because of his credit rating, no lender will discuss financing with a prospective buyer, unless he/she can show a fully executed Agreement of Sale.
The first prospective buyer (if you could even call him that) was not serious about buying and was stringing you along. If a prospective buyer will not sign an Agreement of Sale from the very outset when he expresses his desire to purchase your property, does not give you any updates on his search for financing, and after 60 days has nothing to show you or report on his efforts in obtaining financing for the purchase of your property, he is not a serious buyer and you should not have waited 9 months. There is a legal principle called "Mitigation of damages" which requires an individual to do whatever he can to "lessen his damages". By failing to deposit his check which would have shown you that it was worthless, and by allowing him to "string you along for 9 months", without showing you any progress he was making in obtaining financing or cashing in his securities to pay for the house, and not setting a settlement date sooner than 9 months from when he first saw the property, when you could have spent that time marketing your house and offering it for sale to others, you did not do anything to lessen your damages.
But, all of that is "water under the bridge". There is no point in "throwing good money after bad". I do not believe that you would gain all that much by suing him because you did not do enough to protect yourself. And, I do not believe that you would receive a judgment of more than $11,000 because you cannot add the seller's assist you gave to the ultimate buyer. More importantly, the cost to sue him would be greater than $11,000, so all you would be doing is incurring legal fees and subjecting yourself to a lawsuit which probably would not adequately compensate you.
I realize that this may sound harsh, but it might be best for you and your siblings to just "chalk this up to experience" so that you do not repeat this mistake in the future.
Kindest regards,
ANDREA
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