Breach of Contract and lost equity

[Ryan_H]

I am currently in a situation here in Colorado where I am trying to purchase a home that will most likely head into foreclosure in the near future. The seller has signed the purchase contract and we were supposed to be closing today. However, only after she signed the contract, we signed an initial extension and did a title check did the seller disclose the number and amount of the additional liens on her house. When it is all said and done, we have been fed many lines about how much money and from where they were going to get it to close the deal, supposedly today. Well, the seller hasn't cleared the liens and the closing is not going to happen.

So far we have the earnest money, the inspection costs, and the appraisal cost into the purchase. In addition to this, the appraisal came in about $20K more than the contract price. I have heard from other investors, and even the seller's agent that we are entitled to our costs and even the lost equity. Does anyone have any experience and advice they can share with a situation like this?

[Dan Auito]

As they say, you can't blood from a stone. You'll be lucky to recoup your expenses, I wouldn't bank on getting the lost perceived equity.

[Debbie]

Man, that really stink! :thumbdown

Hang in there Ryan.

Other MB members will see your post and share their experiences (I don't have that experience to this date).

BTW, welcome to the Magic Bullets Fambly!

Debbie

[Jeffery (LCLA)]

I think your first mistake was putting up earnest money (other than a few bucks "just to make it legal") on a home heading for foreclosure. Homeowners that don't handle their own funds to take care of financial obligations certainly won't handle your funds any better. Hopefully you gave the agent your earnest money and he's holding it in his account . Your second mistake was expecting a home owner facing foreclosure to come up with funds to sell their house. That's just my opinion and I'm full of 'em. Take no offense 'cause none was intended.

You should be entitled to recover your costs and that should be stipulated in your purchase contract. Whether or not you can recoup your costs is another matter but at least you can claim that as a deduction as business loss on your taxes. You can sue for specific performance but it's really a coin toss as to whether you win or not and that 20k equity will be eaten up quick with attorney and other legal fees so you'd still be in the situation of squeezing some stones and have nothing to show for it other than tired hands.

In my opinion some more, I suggest that you contact the would be sellers and have them sign a promisorry note for a refund of your costs. If they fail to pay, you can always sue for that and garnish wages, tax refunds, etc. You may also be able to put a vendor's lien on the property and if the home does go to foreclosure, pray that it brings in enough money at sale to cover your lien (not likely, though). Good luck to you

[Jim Johnson]

I am currently in a situation here in Colorado where I am trying to purchase a home that will most likely head into foreclosure in the near future. The seller has signed the purchase contract and we were supposed to be closing today. However, only after she signed the contract, we signed an initial extension and did a title check did the seller disclose the number and amount of the additional liens on her house. When it is all said and done, we have been fed many lines about how much money and from where they were going to get it to close the deal, supposedly today. Well, the seller hasn't cleared the liens and the closing is not going to happen.

So far we have the earnest money, the inspection costs, and the appraisal cost into the purchase. In addition to this, the appraisal came in about $20K more than the contract price. I have heard from other investors, and even the seller's agent that we are entitled to our costs and even the lost equity. Does anyone have any experience and advice they can share with a situation like this?

It was good talking to you today. Keep me in the loop as to how things are going. In all, your situation is not so bad. If they have not cleared the remaining liens by Monday, call me again and we will see if maybe I can buy one of them. Your in a good deal- just keep your self under contract.

I look forward to talking again... let me know if your even on the north end of Denver... I am available for lunch on days that end in 'y'.

[Ryan_H]

Luckily, we only put $500 for earnest payment and it's being controlled by the seller's agent's brokerage office. What's most frustrating is that they priced the house to go very quickly. In fact we were the first ones to see it, the first of many offers in, after only a day on the market. It wasn't until we had the contract signed and working towards the close that they informed us of the liens. The first story was the dad and fiancee-to-be would come up with the money. Then it was most of it, then it was some of it. Now today was going to be closing, and now they only have one lien that they have to negotiate a short-pay. It's a pretty good deal for the area.

[Debbie]

Sounds like Ryan feels relieved. Good job Jim! :praise: