Recourse against a dishonest buyer in an RE transaction

[Mark Blaz]

A bit of backstory. Back in November I decided to sell three rental SFH's that I owned and was renting to long term renters. The properties are in distressed areas and after owning them for 15yrs, I made the decision to short sale the properties. I identified a buyer who made a cash offer. Over the course of the ensuing six months, I work through the very challenging short sale process, massive amounts of paperwork and the engagement of attorneys, banks, negotiators, etc...

During this entire time, this incredibly dishonest and deceitful buyer is limping along through the process, making counteroffers at the very last moment, ghosting for long periods of time and generally displaying a total lack of understanding any part of the transaction.  The best was the month long trip to Australia where he was going to be completely unreachable and unavailable despite being told that deadline to close was at the end of the month.

After pleading with FNMA for an extension, my attorneys kept trying to schedule a date to close.  At the point where we're only a couple weeks away from closing, we get a vague reference about the need for bank appraisals.  Meaning that he was now changing his financing months down the road to bank financing, from a cash deal.  There was no communication and explanation what was happening and why, but simply asking for access to the properties for appraisal.  Questions about why or what was happening went unanswered.

Last week, I was told that a decision by their loan committee was imminent and that we could close just within the deadline.  Monday, Tuesday, no response from their side.  Total silence. Finally their paralegal makes some vague reference that they didn't get the loan, but she's not sure.  The RE agent that put the deal together and was working for the buyer finally answered my call and was silent and just kept mumbling I'm sorry.

tl:dr  Scumbag buyer put offer on short sales, strings the process out for six months with no intention of competing the transaction

[Steve Hall]

@Mark Blaz 

Welcome to BP. How does one own 3 properties for 15 years and end up needing to short sale them? Kudos to you for getting the lender(s) to go for that. Sounds like the properties are probably good deals if they're being shorted. Why don't you put them up on BP?

If the buyer does not show up / perform at closing that's a breach of contract... you keep their deposit and re-list the properties. Simple.

A portfolio deal should have had 10%-20% down. That is yours to keep when the buyer fails to perform. If the buyer only put $500 down, then that it is on you. (That is the amount you agreed to keep in the event of default when you entered into the contract.) In most states, buyer's cannot change from a cash offer to a financing offer it the they signed a contract to purchase stating that they were not getting financing. You would have to agree to a change (by adding an addendum), in writing. You also should have had verified proof-of-funds early on in the first week or two of the deal.

Never extend closing. I have had that pulled on me many times. I always deny, and somehow, the buyer always seems to pull it together in time.