Seller Broke Contract - Any Advice?

Houston, Texas
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Seller Broke Contract - Any Advice?

America Robles
New to Real Estate · South East Texas · Member since 2021 · 4 posts · 3 votes

Hey everyone!! I've run into a major real estate issue and have called several different attorneys' offices waiting on call backs.

I know a lot of you have years of real estate experience and I'm curious to see anyone can give me some guidance or had something similar happen.

So, I was getting ready to close on a house when days before the closing. The seller's agent reached out to inform us that the seller owned more on the house than he thought and could not sell it at the price we originally agreed on. He also had a second lien on it.

(Not sure exactly what all he had going on, but I know it was several issues)

I was not going to go any higher! It's not my fault the agent didn't do her research.

Plus, I could not afford to have my monthly note go any higher.

The contract was signed at 97k sell price with 3% closing assistance.  They wanted to raise the price to 113k!! And take away CC

My agent tried to communicate with their agent to see if they would refund my inspection fees and appraisal fees, but they kept telling us he had no money.

We continued to try and make contact with them up until the day of closing. Their agent at this point is not responding to our calls or texts.

At closing, I brought the cashier's check and I signed all the docs just to show I upheld my end of the agreement.  I am currently out about 3k which may not be a lot to some, but it is to me. I also transferred my kids to another district and moved daycares. Maybe I jumped the gun on that, but I never imagined this to happen. :(

I was debating on even trying to take this to court, but I just can't let them get away with doing this to me and my family.

They also just listed the home back on zillow :/ Any advice?

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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
4y
Quote from @Brian Ellis:

Did you not get title insurance? If this is the case, be glad you didn’t take ownership on a property with a second lien. Who knows what else is going on.

Was it a mechanics lien? Taxes? There could be a number of things that you may be responsible for once you take ownership.


this is a case of the closing attorney or title company not running full date downs until way late in the game.. its common in some markets.. this simply would not happen on the west coast were title is run the day you open escrow and you have a full title commitment within 3 to 5 days.. ONce it came back with these title issues the deal gets re traded or it dies .. the contracts in most states if they are MLS Nar type contracts allow for seller to back out and buyer to back out and get EM returned if title cannot be cleared at the price your paying for it.

the only way this person would take title to liens is if the title company missed them and would be on the hook to clear them at their cost.. or she did her own closing with no title company or insurance and since there is a new lender involved they will want a lenders policy so that answer that quesiton.. to me this is simply a case of title company waiting to long into the process to run full title and do their date downs.
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  • Eliott Elias
    Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
    4y

    Can keep the earnest money and threaten to take them to court. Get a demand letter set up, i'd get with an attorney to see best plan of action. I can put you in touch with one in Houston 

    0Reply
  • Sergey A. Petrov
    Real Estate Consultant · Seattle, WA · Member since 2022 · 1k+ posts · 784 votes
    4y

    Tough one. You can either walk away or sue to force the seller to perform. I am not an attorney but suspect you’ll likely win in court. It’ll cost more in legal fees which will probably get awarded to you but if the seller has no money and they are upside down on the house you likely won’t collect. You’ll still close and own the house in 12 months once the legal proceedings go through the motions but… 

    1Reply
  • Danny Polanski
    Chicago, IL · Member since 2020 · 184 posts · 182 votes
    4y

    The lawyers you have contacted will have no problem enforcing the real estate contract that was signed. 

    Read every line of your contract now, if you haven’t.

    My guess is, as long as the contract was executed and doesnt allow a sellers “out clause” you will be owning a new home soon enough. 


    0Reply
  • Bill B.
    Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
    4y

    Assuming as the seller states they don’t have any money. Yeah. As long as you’re willing to payoff or assume the extra liens on the property you should be good to go. You can’t make the seller pay off loans if they don’t physically have the money. 

    Hire lawyers, pay their costs, find housing for the next 6-12 months, make sure you will still qualify at the probably higher rates, and IF you win (let’s call it 50/50) you might be allowed to pay the extra money they’re asking for today to pay off the liens. If you lose you’ve probably tripled your losses. 

    Hopefully the seller keeps making payments or the balance owed will go higher and higher during those 6-12 months with interest, penalties and fees. 

    1Reply
  • Michelle Harrington
    Rental Property Investor · San Jose · Member since 2020 · 44 posts · 22 votes
    4y

    I definitely think you will win the case if you decide to sue them. But, it will cost you time and money too. But maybe you will get everything you spent back or maybe more at the end. 

    0Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    4y

    @Eliott

    They are the buyer not the seller.

    Original poster

    1. Have you called the title company to confirm these numbers

    2. Since this is a short sale, work with the lenders to release a partial satisfaction where the release the house but not the remaining debt from the seller

    3. A lawsuit will not do much as the original lender will not release the lien or obligated too. So you cannot receive clear title to the property. I would request fees be refunded and if borrower has no money tell the selling broker they should pay up. I know many brokers on here probably not agree with that but I would say it doesn’t hurt to try.

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  • Brian Ellis
    Rental Property Investor · South shore, MA · Member since 2017 · 1k+ posts · 1k+ votes
    4y

    Did you not get title insurance? If this is the case, be glad you didn’t take ownership on a property with a second lien. Who knows what else is going on.

    Was it a mechanics lien? Taxes? There could be a number of things that you may be responsible for once you take ownership.

    0Reply
  • Craig Janet
    Member since 2019 · 223 posts · 261 votes
    4y

    You could take him to small claims court and at least have a shot at getting your earnest money back. But I would move on from the house. He cannot sell the house until all the liens are satisfied. If your offer isn't enough, then he will have to pay the difference in cash which he is unable to do. Your title/closing company should have found this out a lot earlier. I wouldn't use them anymore.

    0Reply
  • Henry Lazerow
    Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
    4y

    You should of just walked away and taken a loss on the $500 inspection. How did you pay $3k? Going through with closing day to prove intent for a lawsuit was silly its never worth suing over petty ammounts of money. Your earnest you will get refunded regardless. Your realtor contract likely provides an out for both parties if not clear title. 

    1Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    4y
    Quote from @Brian Ellis:

    Did you not get title insurance? If this is the case, be glad you didn’t take ownership on a property with a second lien. Who knows what else is going on.

    Was it a mechanics lien? Taxes? There could be a number of things that you may be responsible for once you take ownership.


    this is a case of the closing attorney or title company not running full date downs until way late in the game.. its common in some markets.. this simply would not happen on the west coast were title is run the day you open escrow and you have a full title commitment within 3 to 5 days.. ONce it came back with these title issues the deal gets re traded or it dies .. the contracts in most states if they are MLS Nar type contracts allow for seller to back out and buyer to back out and get EM returned if title cannot be cleared at the price your paying for it.

    the only way this person would take title to liens is if the title company missed them and would be on the hook to clear them at their cost.. or she did her own closing with no title company or insurance and since there is a new lender involved they will want a lenders policy so that answer that quesiton.. to me this is simply a case of title company waiting to long into the process to run full title and do their date downs.
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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    4y
    Quote from @Chris Seveney:

    @Eliott

    They are the buyer not the seller.

    Original poster

    1. Have you called the title company to confirm these numbers

    2. Since this is a short sale, work with the lenders to release a partial satisfaction where the release the house but not the remaining debt from the seller

    3. A lawsuit will not do much as the original lender will not release the lien or obligated too. So you cannot receive clear title to the property. I would request fees be refunded and if borrower has no money tell the selling broker they should pay up. I know many brokers on here probably not agree with that but I would say it doesn’t hurt to try.


    it just became a short sale and your seller has to agree to go through the process of short selling which is quite a chore for most sellers and most simply wont do it.  there is not enough money in this deal for lawyers or the seller to try to short sale since it will ruin their credit etc..
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  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    4y

    What does the contract say about the seller being unable to deliver marketable title? My guess would be the EMD gets refunded and nothing more.

    This happens quite often. Sellers are unaware of Junior liens from loan mods… or from charged-off debts that nevertheless remain as liens. 

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  • Dan DiFilippoBusiness Member
    Real Estate Broker · Fayetteville, NC · Member since 2020 · 251 posts · 244 votes
    4y

    @America Robles in my state, you can cloud title and possibly take the house. Not too sure how it'd work given the existing liens, sounding like the exceed the price. I'd say definitely take action. It also sounds like it could be possible they're just trying to grab a higher price. Also, your agent should have their broker contact the listing broker so that you can have everyone working for you.

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  • Matt Bishop
    Rental Property Investor · Dallas, TX · Member since 2020 · 161 posts · 88 votes
    4y

    @America Robles, walk away. The title company holding your escrow money should return it to you. If you try to sue the seller for performance, your kid's school year will be over before it ever gets settled. My main concern for you is the emotional toll on you as it drags on, putting your family's life on hold while you deal with the uncertainty of the outcome. The money, attention, time and energy you put in pursuing this would be better spent improving your life and your relationships. Keep smile on your face and gracious attitude. Find another so for yourself and be thankful the housing market is cooling a little as more property becomes available. You may find something you like even better. True, you are in the right, here. Real estate deals are never certain and final until the title company hands the buyer and the seller the recorded documents. Anything unimaginable can and often does happen to collapse the deal. I've experienced both sides, as a seller and as a buyer when the deal fell through because of unforseen events.

    1Reply
  • Jonathan R McLaughlin
    Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes
    4y

    did this start as a short sale? If so the seller could have signed and the bank just said no. We bought a few short sales post crash and it was kind of the wild west in terms of what the banks would do on any given day. 

    If a bank is involved I might stick with it as they may change their minds one day and say "is that original offer still good?" Its probably more systamitized now and other folks know more than I do. I certainly wouldn't make any future plans based on this working.

    0Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    4y

    As @Tom Gimer mentioned, most state contracts give the seller an out if they can not deliver clear title “after reasonable effort”.  In any case, you will never “win” this in court…even if the judge would want to enforce the contract (doubtful due to sellers circumstance” there is no way to actually “force” the seller to pay off liens with no money…this deal is dead.

    2Reply
  • America Robles
    OP
    New to Real Estate · South East Texas · Member since 2021 · 4 posts · 3 votes
    3y

    ****UPDATE**** 

    I filled a small claim ($140) against the seller at the end of September and court date was set about 3 weeks later. 

    I was super nervous the day of the trial since it was the first time, I was going to be seeing the seller in person.

    Well, I told my side of the story. Kept it short and to the point. The seller... Goes on to tell judge his whole life story LOL 

    Basically, says he never knew about the lien and even brought receipts showing how much he spent in preparation to move out for me to move in.

    He tried to imply, in my eyes, that they did me a favor in accepting my offer.  This man made no sense at all. Judge came to the conclusion that he basically signed a contract and didn't follow through. So... Judge ruled in my favor :)   I now have to wait for him to pay me or I can put another lien on home. 

    This ordeal is not over but one step closer to getting my money back.

    Thank you all for the advice!!

    1Reply
  • Frank Greg
    Lender · rate.bid · Member since 2022 · 324 posts · 62 votes
    3y
    @America Robles:

    So, I was getting ready to close on a house when days before the closing. The seller's agent reached out to inform us that the seller owned more on the house than he thought and could not sell it at the price we originally agreed on. He also had a second lien on it.My agent tried to communicate with their agent to see if they would refund my inspection fees and appraisal fees, but they kept telling us he had no money.


    What you do is sue them both -- seller and agent. They both can be held liable and were both negligent on some level. How do you not know that your sales price is lower than the outstanding loan balance and how do you not know about unresolved liens on the property you have listed for sale when clearly this would likely be discovered by the title company prior to closing?

    You however might have a problem. Usually prior to opening escrow, the buyer should have requested a preliminary title report where title company would advise buyer of it's ability to issue a title insurance policy on the property (or not). This is why you also as a buyer have to explicitly state in the sales contract how to address defaults arising from actions (or inaction) of the seller.

    They can't both (deliberately or not) misinform and/or mislead you to incur expenses then probably pull the same mess with a different buyer. 

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  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    3y

    Im sure your contact states that title must be clear in order for the sale to be consummated. If they can not clear the title because the liens on it are higher than what you they thought, then the title cant be cleared.

    You are of course welcome to purchase with the liens in place without clear title if you are paying cash

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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    3y

    @America Robles

    What ended up happening ?

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  • America Robles
    OP
    New to Real Estate · South East Texas · Member since 2021 · 4 posts · 3 votes
    3y

    Sorry I forgot to add.. Judge ruled in favor!!! 

    Now to try and get the money back..

    1Reply
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