Seller trying to back out of executed contract

deposit checks are held in an escrow account, not "cashed".

Did the seller sign the contract? was it fully executed? Until the seller and you both sign, and both attorneys receive a fully executed copy, there is no deal.

welcome to NY RE. there is no deal until everything is signed and received by the buyer's attorney.

you can blame NY laws for this. sheer stupidity.

Yep, everything is signed. Purchase agreement was delivered along with check to escrow agent. Dotted every i and crossed every t. I have no doubt that I have an airtight case against them. But the question is how long is it going to take to sue.

If she tries to re-sell the apt and finds another buyer, your pending litigation or even a lien against the apt should scare off any potential buyer. That would be uncovered by the buyer's attny in a title/lien search. She'd be very foolish to try to shred your existing contract.

Sue for specific performance? for money damages? Not worth it, cost or time-wise, in either situation.

I feel for you. I had a signed contract on an apartment 2 weeks ago, but the seller never counter-signed it. The apartment had been on the market for over 6 months, and then 2 buyers came out of thin air and out-bid me right after I signed on the dotted line. Clearly the seller's broker was shopping my offer. The seller asked that we match the higher price, so I walked.

Thats really a question for your attorney, but its seems slanted that in the contract the seller can usually keep the deposit or a portion of it if you the buyer back out, but what do you get if the seller backs out? Usually nothing but legal expenses trying to fight it. I'm sure it could also just be cold feet, does he have a broker? his broker should be working overtime to get this deal to stick and get them off the fence. If your dealing with them direct maybe put in a call, find out what his hold up really is. I find these problems can be worked out, perhaps he doesnt know where he is going to live after he sells? Perhaps he needs a couple more open houses? I dont know, but before you call in the big lawsuits and spend money, try talking to him man to man.

Also, seller could sign, change mind and then direct his/her atty. to not deliver the contract to the buyer/buyer's atty. - many contracts stipulate that contract is not effective until delivered to buyer/buyer's atty.

uwsbeagle,

I do have a lien against her if she sells it to someone else. But as of now, we just have a signed purchase agreement. I'd probably have to file a lawsuit for the lien to show up in any title search, right?

JWL. you are not saying if your attorney received the signed contract back. that is the legal definition of a fully executed contract.

you'd file lis pendens, and then commence a suit

I think she realized she sold it for below market value. She was in pre-foreclosure on the apartment from the condo board and bank and I stepped in with an offer which was accepted. So she was pressured into accepting. Maybe someone recently made her a higher offer and she's hoping I'll go away. Fat chance of that. We've had our heart set on the place for months.

Strange thing is, unless it really is another offer, she'd be stupid not to sell. In another couple of months, the bank is going to take it from her in foreclosure. My offer would have been enough to pay everyone off and she'd get 100k in the process.

JWL, I'm not a lawyer but in order for the lien to show up it would have to be properly filed and recorded by your attny so that it becomes public record. I'd check w/ your attny on that.

Seller signed, sent to me. I signed, sent to my attorney. My attorney forwarded signed document to seller's attorney along with check. Seller's attorney acknowledged receipt of both but did not cash check. 2 days later, seller wants to back out. I say it's a done deal.

from pre-foreclosure to foreclosure can take years. i was in contract on a short sale for 2 yrs. the "owners" have not been paying the mortgage or taxes for over 3 yrs while collecting rent on apartments. they don't even have a good reason not to pay the mortgage. they can sell it and walk away with losing $50K, but why would they want to if they are being paid to stay.

American Greed...classic....this is what someone needs to remind her..."Listen your credit is going to be demolished, and the bank is going to take it back, you are already in contract, if you dismiss it, you will be sued, credit will be crushed, and you will be homeless with no money..." She needs to wake up to reality, take the money and run, live to fight another day.

agreed - but litigation is very expensive, lengthy and often unjust in even the most straightforward matters - swift justice is not available, and that's unfortunate, even when there's a clear case like this

Is it not strange sequence that seller signed first and then sent to you and then you signed and returned with check? How would the seler sign a blank contract that you yourself had not signed?

you need to consult with an atty (which I'm not) but I believe that if the check has not been cashed you have no contract.

Move on to the next one.

ali r.
DG Neary Realty

yes, just move on. You will get your check back.
They were playing you.

If the check was cashed -- that's a criminal activity.

Having the check deposited is AS IMPORTANT as having executed copies of the contract, I think possibly more important.
Going to court nobody wins but if Vengeance is not exclusively the Lord's in your eyes, have a friend make a higher offer screwing up the "new" buyer's deal and sour the new buyer as well.

Also you might be able to file a lis pendings, though I don't think you'd win the suit (deposit check not cashed) but if it's in you to make seller's life annoying for the next 3 to 6 months and cost you between $1k and $5K. Maybe enough to ask for your deposit + $10K back for your trouble.

THis really is a discussion to have with your lawyer.

Here's the thing. The equivalent apt in the same line in the building is about 300k more. I do not want to move on because it was a great deal.

I do not think the check needs to be deposited. We both signed in good faith and I delivered the check in good faith. Seller's attorney acknowledged receipt of both. If that's the case, then the seller's attorney in ALL cases can just hang onto the check forever and claim that the buyer has to make good while the seller can just hand back the check and cancel the contract.

matsui,

Seller asked us to draft the agreement which we did. They signed before we did. The sequence of signatures doesn't matter since at this point, we have both signed and the contract has been delivered to their offices.

Ive done over a dozen real estate tranactions in my life and my attorney was always most concerned about when the check was deposited.

What is your lawyer's response? Surely you've asked as all we've read is what you think?......

The seller has not received full payment for house. All you gave them was a small deposit which they never cashed in.I don't see how any court can forcefully make that seller and his family vacate their own property by forcing them to go to closing and take full payment.
I do believe you have a right to some damages but your attorney can best advise you that.

Attorney thinks we have a deal. Seller's attorney does not question that we have a deal. He's trying to convince seller it's in her best interest to sell.

However, as escrow agent, he told me he won't be cashing the check until he's sure we're going forward.

Also, just did a google search and recalled from my business law days. A contract is binding regardless of whether or not there is a deposit. Deposit could be $0 and the contract is still binding, unless made under duress (at the point of a gun, not under pressure from foreclosure from third party) or by a party under age or not of sound mind.

The contract could have had a $0 deposit clause and they'd still be required to sell to me.

what does the contract say in regards to a default by the seller? most contracts provide for the return of the deposit, and nothing more - not to say you couldn't still commence litigation

jnnj,

If I default on contract, seller can keep my deposit.

If seller defaults on contract, I have all rights under the law including, but not limited to, specific performance (i.e. forcing him to sell it to me)

You and your attorney need to be aggressive with the seller's attorney and represent that you will pursue the lien and legal action if seller backs out. That can be communicated to the seller and get her off the fence.

well, you have a very tough choice to make then, seems like you have a winner, but a costly one - was recently involved in a matter of trying to get back a deposit - took 8 months, got it back, but the cost was almost equal to the deposit

Aren't you the same nut that posted that ridiculous post a few days ago that all brokers are useless and you yourself was able to successfully negotiating a deal?

Weird - maybe there were no brokers involved with your transaction because no broker wanted to work with this seller and I guess, well, we all now see how that turned out.

Based on the two separate posts, you sound like a real joy to work with. You probably did the brokers a favor if anything.

But, this broker will answer your question anyway. Yes, you have a case, however it will take 6-8 months, maybe longer, having that money tied up in escrow and having to make yourself available for perhaps 3-6 court visits, which will inevitable cost you more than if you just agree to void the contract. But knowning you and your nifty "I can do anything without a broker" strategy, you'll probably ask for a settlement anyway and screw that up.

Good luck buddy. Just walk away and next time, maybe consult a broker, chief.

JWL--I hardly doubt you can force this seller to sell to you. I don't think attorneys make money from not closing on deals so I can understand why the sellers attorney is trying to get this deal closed.
How much money is it going to cost you to file a lawsuit against the seller and how much money and court time do you think you'll spend if the seller doesn't want to sell his apt?

sorry i didn't read Nah's reply. I agree with Nah on this one although he could of left out the personnel attacks.

I hope you didn't sell your other place and were counting on moving into this place.

You're right renterjoey. That was fairly conservative though. I should have perhaps held back a little more, but I didn't curse or say anything inappropriate and based on the circumstancs of this post, it appears I'm right.

While I can appreciate why many people don't like brokers, shoot, I don't like many myself and I am one, JWL's post about "brokers" the other day was just ridiculous.

Nah,

Hey "chief. " If I was a gambling man, I would bet that his broker is causing all this trouble by telling him that he has a buyer willing to pay him $50 million for his apartment and not to sell it to me. The broker must be pissed off I found the listing direct and contacted the seller directly.

I stand by my words that brokers are obsolete and overpaid. And judging by the amount of replies in that post, I'd say the majority of people agree with me. Yeah, you're protecting your job. Just like those unemployed American auto workers whose jobs are being outsourced to more capable and cheaper employees elsewhere who make a better product.

If the agreement is really for anything near $300K below market (as distinct from what other units are listed for in the apartment), then obviously you can spend quite a lot on time and legal fees and still come out ahead.

As crescent22 suggested, there's certainly no harm in taking an aggressive tack at this point and suggesting that you'll sue for specific performance if they seller tries to back out. If that doesn't work, I'd probably go the extra step of filing lis pendis and a complaint as well, which will probably foul any other attempts to sell the house. If that's still not good enough to convince the seller to go through with the transaction, you and your attorney should have a conversation about whether it makes sense to proceed with the lawsuit.

If my hunch is correct that it's his broker causing this trouble, telling him to breach a contract and accept a higher offer, whose interest is he looking out for? It certainly ain't the seller's who he should be REPRESENTING. He's leading this man towards financial ruin and bankruptcy. All for her stinking commission.

I would not say you have an air tight case at all. You need to read the contract - there will likely be a section or paragraph that says when the contract is effective. For example, if it says something to the effect of "This contract is effective when signed and delivered by both parties" you likely have a valid contract and possibly a claim (more on that below). However, if the contract says something like "This contract is effective when signed and delivered by both parties and the Seller shall have received and deposited the Buyer's Deposit" you have a valid contact but not one that is effective and thus no claim. You and I could sign a contract that says "I will pay you $500 for your car if my mechanic says there are no mechanical problems with it." Once the contract is signed, there is a valid contract between you and me; however, until my mechanic says there are no mechanical problems, I have no claim to your car and you have no claim for the $500.

Also, even if you have a valid contract you need to consider what your damages are. Although the same exact apartment may have sold for $300,000 more on a different floor, the law considers each piece of real estate to be unique. While $300,000 may be one indication of value, it is not determinative.

Most importantly, even if you have a valid contact (and I'm not saying whether you do or don't) and, for the sake of argument, we agree your damages are $300,000 (and that is a big if which would get litigated in court) - it likely does you no good. The saying "squeezing blood from a turnip" to mind. You said this is a short sale. The bank has a lien over the property. I assume the property is now worth less than the amount of the mortgage (hence a short sale) and the Seller doesn't have much else in the way of assets (otherwise, he or she would be paying on the mortgage). So even if you spend years and thousands of dollars in court, if the seller has no assets, you won't see a dime (Seller in that case, is "judgement proof"). Sure, you can jump up and down and say the Seller is a "dirty rotten contract breacher" but that doesn't get you a dime if the Seller has no money.

As for getting a lien, the only way you could get a valid lien is to go to court, win at trial (which will take years unless the Seller simply doesn't show up with is highly unlikely) and then if the Seller doesn't pay, you could file a judgement lien. That is years (likely many, many years) and many thousands of dollars away. You can't just show up and say "this guy breached the contract" and get a lien put on the property.

To be honest and practical - you can see if the Seller will re-negoitiate, but you are not going to get anywhere with lawsuits in a situation like this (any of the reasons above would make it difficult, but all of them in aggregate make it sound like you are getting nowhere). You may be able to get an aggressive attorney to send a threatening letter and make some waves, but unless you are really willing to spend many years and many thousands of dollars chasing this (and it is by no means a sure thing) you are wasting your time. I'm saying you are wrong or defending the Seller (although I haven't heard his/her side) - just pointing out the reality and being practical.

well if that's the, case the seller doesn't find the broker obsolete so there goes your argument. Not sure what you do for a living but brokers are salespeople and most if not all companies would have a hard time surviving without someone who is selling their product or service.

As far as the seller backing out it's a free world and you are free to do whatever you'd like to to make the seller pay for your loss. I standby my belief that their isn't a court in NY that will force a seller who is living in his home to close on his property and vacate their house.

That's so true, downtown. It's the biggest misconception about filing a lawsuit, that level of ease and rapid resolution.

Firstly I am not a lawyer and at the same time I had a friend experience something similar in NYC real estate.

Both had signed, she had sent her check, for 6 months she was in uncertainty about if the settlement would occur. The owner said they changed there mind and were not sure if they were going to sell. My friend was beside herself because she really wanted that apartment, her lawyer said " an executed contract is when all the steps are completed......and the step of the check being cashed has not been met."

My friend is not at all aggressive and wanted to take the chance on waiting as she had another home, unfortunately one day 6 months latter the check was sent back to her.

After that I have a clause which I add to contracts, which is along the lines.... "the check is deemed cashed at the time the check was received." because I don't like uncertainty.

With regards to another reason why the "purchase agreement" (not executed contract) might be invalid is duress, Not that I am saying you are even aware of this or that it was your intention, when you say above "so she was pressured into accepting". I don't think it would be hard for someone in that position to convince a court that she was under duress from the bank to sell. I know as far as prenuptial agreement contracts, a lawyer will be very concerned if they don't have a signed contract with in 2 weeks of the wedding, because if the contract ever gets challenged they will have a good case for duress.

Oops - meant to say " I'm NOT saying you are wrong or defending the Seller ..." in the last sentence (forgot to include the word "not").

Another question to consider- is this a coop or condo? Do you need board approval?

Bullish

He said it was a condo. If you weaseled your way in buying a unit way below market value the condo usually has right of first refusal.

Wait this thread can't be real. Foreclosures don't exist in manhattan

Brooks, please limit your posts to just 1 word.

fhsack, great point, I can't imagine any board even "offering" an interview to a prospective buyer if the seller lets them know that the building will record a higher price with another buyer that they have, plus the ability to help one of there shareholders.

I have more faith in the broker, trying to get their commission and more money for the owner, especially if there is an extra $300,000 to play with.

It seems a little silly to speculate about what a coop board would do since JWL has already indicated that this is a condo. Sure, the condo board could buy the unit, but that seems to never happen in practice and the seller doesn't end up with the unit in the end, so it's irrelevant to her incentives.

Similarly, I'm not sure why people are jumping to the conclusion that this is a short sale. As JWL wrote: "My offer would have been enough to pay everyone off and she'd get 100k in the process." That's not a short sale since the offer is clearly for more than the value of the unit.

So, overall: JWL, don't take advice from people with poor reading comprehension skills.

Sorry - missed the fact that it was a condo. However, the condo board can still turn the buyer down.

No they can't. They can buy the unit themselves. That's their only recourse. In practice, this basically never happens and in any case the seller is still stuck with the transaction on its original terms.

JWL, I don't mean to be contrarian, but, based on the facts you've provided, you will very likely be able to get the condo, and do so quickly.

Contrary to what many have posted here:

-"cashing" the check is not typically relevant to a breach of contract, unless specifically provided for in the Contract of Sale.

-a "lien" is not relevant either. If the property is a condo, there is real property at issue. An attorney would file a lis pendens with the county registrar that would, as a practical matter, prevent the sale or conveyance of the property to anyone else.

-the road to getting the condo will likely not be a very long one. Your lawyer could probably walk out of court by the end of the week with a Temporary Restraining Order prohibiting the seller from marketing or selling to anyone else. That kind of leverage closes deals.

Shoot me an email, JWL. If I can't help you, I can direct you to someone who can.
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Marco Santori is a lawyer in New York City, but he isn't your lawyer, and you should not rely on this post for legal advice. If you have any other questions, feel free to email at MSANTORI@NMLLPLAW.COM

Not to be an additional fly in the ointment, but I wonder if the condo board will exercise their Right of First Refusal if the apartment is so drastically under-priced?

I have only seen this happen once at the Printing House on Hudson street.

#1 Seller has not been paying common charges for 2 years. Condo board can't wait to get him out.

#2 Condo selling for $1.8mm. Equivalent units asking $2.5mm. Yeah, it's not $300k. More like 700k. But it's not like I'm ripping it off from him. His advertised asking price through a broker was $2.0mm. I negotiated down to $1.8mm. Also, the condition of his apt sucks compared to the other ones.

#3) Condo board will not exercise right of refusal because of #2. If I was buying for $50k, yeah, they'd exercise. But getting this kind of cash together to buy a unit is not easy.

#4) My contract specifies execution upon signature and delivery. No mention of check. Case closed.

I'm getting a good price. But at the same time, everyone is getting paid. Everyone gets paid in FULL so it's not a short sale. And owner walks away with $100k. Checking streeteasy records, he paid $1.8mm back in 2006, so he doesn't lose a dime.

MSantori,

I may take you up on your offer. My lawyer doesn't seem to be on top of it.

Based on #4, the seller's actions are a hail mary to try to get you to go away.

Threaten the heck out of him; he would have to incur costs to defend himself in court against you also.

Since it sounds like he is short of funds, you hold the advantage of perceived resources over him. Use it or the threat of it to get him back in line.

I would only advise that time is of the essence. If the seller enters into another contract before you get your Restraining Order, it's often difficult (and sometimes impossible) to unscramble the eggs. Unless you act quickly, you run the risk of protracted, entrenched litigation involving another spurned buyer, or maybe even the foreclosing bank.
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Marco Santori is a lawyer in New York City, but he isn't your lawyer, and you should not rely on this post for legal advice. If you have any other questions, feel free to email at MSANTORI@NMLLPLAW.COM

the guy is set to make a lot of money if you go away (assuming your numbers are correct). I would think he already has another buyer and a contract in the works. if you really want the apt and to preserve some instant profit you will make maybe you should increase your offer. Stick and a carrot approach, as in here's another 100k otherwise we are going to court.

I had a similar problem about 18 months ago. I 'purchased' a condo and the seller refused to settle. Everyone advised me to walk away - which is what I'm sure the seller wanted - but I live in Australia and had been looking for such a place for many years so was determined to see what could be done. My attorney referred me to a litigation attorney who looked at the contract and advised me in detail what would be involved and the likelihood of success. I proceeded, it cost quite a lot of money but finally the seller caved in. I'm glad I proceeded. I can give you the attorney's name if you wish - he was thorough and firm. I would happily recommend him.

I still don't get the "cashing" of the check thing.
A deposit submitted by the buyer's lawyer, from the buyer of my condo, was sent to my lawyer and put into escrow.
It stayed there until the closing. After, whatever was left over minus legal fees and closing costs was wired by my lawyer into my Sanford Bernstein account.

At what point in between could that money have been available to me (without the buyer renegging)?

Thank you for your help in advance. It's early and I'm not firing on all cylinders yet.

MSantorini said it best.

The level of ignorance on this thread is astounding.

Ino has a solution for you - rent a 'similar' place for $2k/month and invest the rest in apple stock for a 100% a year return.

So I don't know, inonada.
Is there something I'm confused about that you can explain? Did I miss something reading it?

It's a week after contract signing. the seller received his deposit check but did not cash.

MSantori: I know that you aren't my lawyer.
But if you were and let's say I wanted to spend some of that 74k before the closing -- you would have "cashed" the deposit and sent me the money?

huntersburg: inonada clammed up on me. MSantori may be with a real live client.
What did I miss in reading the OP comment?

Maybe dwell will come on and explain it to me later.
I don't care. I got the money. I didn't need it to spend on anything I already didn't have the money for.

I'm going to breakfast.

Ino is a financial wiz.
I'm just a publicist. Maybe I'm missing something about "cashing" the check.
I asked because I'm curious to know. But I somehow managed to survive all these years not knowing so I guess my level of ignorance on this thread hasn't made me less intelligent in real life.

Ino can squeeze money from a stone. she really is a finance wiz.

I still don't have the answer. I think it's some kind of terminology.

Sue me... sue you.... sue everyone!

brooks, you really don't know what this discussion is about, do you?

JButton, shut your trap. At least he didn't say "Bullish".

It is a she no? She thought she was on blndr site

JButton, is your point to insult women - they are the butt of your joke? Is there something wrong with being a woman? About half of the population are women. This applies globally, and over time as well.

More than half of population, about 52%.

You are a misogynist?

Bullish

Truth, our posts crossed wires. I wasn't talking about your post (hadn't even seen it), but rather many of the comments from the day prior. Sorry for the confusion.

>If the check was cashed -- that's a criminal activity.

Not as catchy as what Johnny Cochran would say. Or even Perry Mason.

how bout

>Seller goes to dentist cause he had a cavity then check was cashed -that's a criminal activity.

Nah that not good. Let me try to think of something more catchy

Truth really meant to say "what goes up must come down it's the law of gravity. Just like if the check was cashed--that's criminal activity."

That's a Levonism, huntersburg and joey.

inonada. Oh, O.K.