It happens countless times. A prospective buyer tenders a $10,000 deposit to a seller for a residential property. But prior to closing, a financing problem prevents the buyer from completing the sale. Most residential agreements of sale contain a mortgage contingency where the buyer may back out if financing is denied. The buyer is usually entitled to full return of the earnest money if denied financing.
Aggravated sellers often look for reasons to keep the deposit when the buyer’s financing is denied. One common dispute is over whether the buyer misled the seller as to creditworthiness. The seller’s argument is usually that no offer would have been made to the buyer if the seller had known of the credit issue.
I recently represented an elderly property owner who was sued for allegedly backing out of a real estate sale. My client resided in her home situated on a beautiful 40+ acre property her entire life. It is peaceful suburban farmland populated by many animals and containing a huge barn. The property was also a family home for more than 100 years.
My client was approached by a developer who wanted to acquire the property for development. One of the family members who sought to benefit from a sale engaged a realtor when the offered price was discovered. But my client could not sell – she was previously diagnosed with advanced dementia and memory loss. Despite the diagnosis, some of the family members misled my client and pressured her into signing an agreement of sale. Fortunately, other family members came to her aid and halted the sale. The developer filed a lawsuit to enforce the sale called a “specific performance” action.
A property owner who lacks mental capacity cannot sell a property no matter how urgent it may be to sell the property. I have represented very well intentioned families who want to save an elderly person’s property from various real estate problems. But if the property owner did not sign a power of attorney prior to becoming incapacitated, a guardianship must first be created.
I recently helped a family stuck in a bad real estate “rent-to-own” agreement. Jordan is a contractor who purchased a property with the intent to renovate and live in the property. He entered into an agreement with a real estate investor to buy a shell property in West Philadelphia. Unlike ordinary sales using traditional financing, the agreement called for a series of payments over a period of several years to the investor. After all payments were completed, the seller investor was required to transfer the deed.
Investors or home buyers like Jordan may find installment-payment agreements attractive if they have good cash flow but poor credit. The installment arrangement allowed Jordan to bypass the traditional barriers to financing that prevented him from obtaining a loan.