How to Protect Ourselves from Sellers that Renig

Question

We have a deal where the deal took longer than expected, due to the amount of time it took to clean up the title on the properties.

Now, since it's taken so long, we are outside of the time period of the purchase agreement.

The seller is now choosing to renege on selling to our buyer, because they're desperate for the money and they've found someone else that's willing to pay a little more, and apparently that new buyer isn't as concerned about the title not being right.

I know that legally, the seller he has the right to sell to whomever he wants at this point.

On the other hand, though, we've put in a LOT of work to find a buyer, and it's not our fault that the title work took so long.

My question, is in the future, is there any way to protect ourselves if this was to happen again in the future? We've put considerable time into this deal, and now we're probably going to leave it with nothing.

I just thought I'd ask, as there's always more to learn. Thanks in advance for your feedback.

J Scott · Answer

I'm not an attorney, but I'm pretty sure that using "Time shall always be of the essence" is contradictory to the first part of that clause. "Time is of the essence" generally means that if the parties don't complete their obligations by the dates laid out in the contract, they are in breach. Curious what an attorney would say about this clause...

Account Closed · Answer

In a seller's market in an upswing, you're going to see lots of sellers moving on to the next buyer if you don't perform by contract deadline. I think the simple answer it to never fall out of contract. If you weren't ready to perform per the contract on the date specified, you should have gotten a written extension or addendum to the contract that outlined the new close date and/or any other terms. I'm a stickler for never being out of contract. Ask anyone who's ever been in contract with me. :) To save the deal, could you agree to match the seller's other offer plus a cash payment up front? As for title work taking time: Get used to that. And plan for it in your contract. You might want to consult with an attorney about title contingencies and how to keep the contract binding on the seller when they occur.

Jon Holdman · Answer

When the delays on title became evident (which is really the SELLER'S problem), you should have amended your contract to give you time to deal with resolving these problems.

Alvin Grier · Answer

The seller is broke, so the buyer paid to cure the titles. There is no listing agent; it's fsbo.

Bill Gulley · Answer

Time being of the essence requires both parties to perform thier duties and responsibilities in a timely manner and when neither party is at fault for any delay, any monies expended by either party are the expense to the party as were agreed. In other words, the seller is required to provide good title, it is the seller's responsibility to cure any defects, not the buyer. I'd say you could stop the sale and get your buyer's money back, at least you would here, but your buyer had no business paying anything. Now, if the seller had no mony and couldn't perform and the buyer advanced funds, the seller owes the buyer. Also, your contract should have had contingencies for delays and provided for automatic extentions, if there are title issues it is usually the buyer who can opt out if it goes beyond an automatic extension period. If the title issues were unknown to the seller, there would have been good faith dealings, if the seller had knowledge, the seller can be liable for damages if they failed to cure the matter. You can't force`a seller to sell, but you can make them wish they had. I'd make a call to the seller/listing agent and get the dealings hashed out, ASAP if it were my client.

Alvin Grier · Answer

Thanks, Oren!

Oren K. · Answer

This is why I always include some text regarding the inspection / DD period that goes some thing like this: "The Seller shall provide extensions to the inspection period, acting reasonably, provided the buyer continues to act in good faith towards closing the transaction. Time shall always be of the essence". Basically, as long as I am moving forward and not intentionally delaying things, extensions will be granted. As an example, if the bank insists on a inspector from a particular list but none of them are available for 2 weeks, this is outside of my control. Asking and expecting an extension is reasonable. This should also always be documented to avoid any uncertainty.

Alvin Grier · Answer

I'm not sure how much the buyer spent on the title work, I think it was around $500. I just found out that the seller appears to have changed his mind and will be closing with our buyer, so that's great news. The other buyer was going to pay 3k more (per house) than our buyer, for a package of six properties. Excuse me while I go find some wood to knock on.

Account Closed · Answer

OK. Now I am curious. I'm curious how far outside the "buying criteria" the other offer is, given that your buyer already has cash in the deal. How much better was the other buyer's offer? And what's your buyer's actual out-of-pocket cost for the title work?

Alvin Grier · Answer

K. Marie, Thanks for the feedback. It doesn't look like the buyer is willing to match the other buyer's price, as the increase on the sales price is outside of their buying criteria.