Q: We recently sold our home (in Maryland), and had a ratified contract. The homeowners association documents were delivered and received by the buyer, and the inspection was completed.
One week before closing, the buyer backed out, deciding he simply did not want our home. At this point, we have packed, scheduled movers and bought a new home. The deposit we received is only $5,000; in a different market we could have probably requested more. Can we sue for breach of contract? - Darryl
A: It is too late for your situation, but your first mistake was to take such a low earnest money deposit. If I am representing a seller, I want the seller to give my real estate agent (or the settlement agent) a minimum of 5 percent of the purchase price. You want the buyer to put up enough money so that he or she will think twice about walking away.
I will assume from your question that the buyer is in default. In many states, when a buyer enters into a contract to buy a condominium or a house in a homeowners association, the buyer has a fixed number of days in which to review the association’s legal documents and back out of the contract.
Basically, you have three alternatives: (1) You can keep the $5,000 earnest money deposit, although your sales contract may require you to split it with the real estate agents; (2) you can sue your buyer for damages (if the house subsequently sells for $10,000 less than the original contract price, this would be the amount of your damages, plus any costs you incurred to carry the house until it finally sells); or (3) you can sue the buyer for specific performance. That means that you file a lawsuit against the buyer and ask the judge to force the buyer to go to closing.
You should consult a local attorney for guidance. Keep in mind that litigation is time-consuming, expensive and uncertain.
Q: If you apply for a mortgage or refinance and the lender orders and completes an appraisal and credit report, but then you decide to go with another lender, does the borrower have to reimburse the first lender for the appraisal and credit report? Can that first lender sue the borrower for the cost of those services? - Jeannie
A: The answer to both questions is yes. You asked a lender to do work for you, and usually lenders will charge a borrower upfront for costs of the appraisal and the credit report. If you decide to use another lender, it has been my experience that so long as you have paid for these products, some lenders will be willing to turn over this information to your new lender.
However, your new lender may not want to honor the appraisal because it has its own list of appraisers. This is especially true today, when lenders want to be absolutely certain that they are getting a true and independent appraisal.
Can the lender sue you if you decide not to use its services? Yes, but as a practical matter, it is too time-consuming and expensive to take you to court.
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