Question: I signed a contract to purchase a house, and settlement was scheduled to take place last week. I obtained a mortgage loan, and showed up at the title attorney's office ready to go to closing. Only the Seller's real estate agent was there, and advised me that the Seller has changed his mind.

Apparently, the Seller was unable to locate another place in which to live and now has decided to stay in the house.

What should I do?

Answer: This often happens in a seller's market, when a seller believes that she can get a better offer for the property. In your case, however, it appears that the seller is struggling with a classic case of "seller's remorse".

The first thing I would do is to try to talk directly with the Seller. Perhaps you can reach an agreement whereby you will go to settlement, but allow the seller to rent back the property for a month or two. You must confirm this arrangement with your lender, to make sure that these terms will be acceptable. You do not want the lender to believe that you are buying an investment property rather than one in which you will personally reside.

If the seller is agreeable to this, have your attorney prepare a license -- not a lease -- for the agreed upon period of time that the seller will remain in the property.

Why a license? There is a technical, legal distinction between a lease and a license. In general terms, a lease conveys exclusive possession of the premises to the tenant, which triggers the application of landlord-tenant laws. Many of these laws are often pro-tenant.

A license, on the other hand, merely gives the licensee permission to use the property, and can be terminated at any time. While the licensor would still have to go to the appropriate landlord-tenant court to evict the licensee, the process is much easier -- and less expensive -- than if you have to comply with the panoply and complexity of the landlord-tenant laws in the jurisdiction where your property is located.

If the seller refuses to accept your proposal, you should carefully read the sales contract. What does it say about a seller default?

In the Washington metropolitan area, most real estate brokers will use the Regional Sales Contact. Paragraph 26 of the contract, entitled "Default," states:

If Seller fails to perform or comply with any of the terms and conditions of this Contract or fails to complete Settlement for any reasons other than Default by Purchaser, Purchaser will have the right to pursue all legal or equitable remedies, including specific performance and/or damages.

Thus, according to your contract, you have three alternatives:

 

1. You can ask to get your money back and have the contract terminated. If you go this route, you should also make sure that all of your out-of-pocket expenses are reimbursed. Keep in mind that you have probably paid for a home inspection, and may have given your lender an up- front deposit in order to obtain your mortgage loan. The settlement attorney will charge you a "cancellation fee," since he has ordered a title search and a survey in anticipate of the scheduled settlement date.

    

2. You can sue the Seller for damages. Did you start looking for another house, and is it comparable to the Seller's property? Have mortgage interest rates increased? Were you diligent in immediately searching for another house? If you decide to pursue damages, discuss the pros and cons of this kind of litigation carefully with your attorney. The measure of damages is difficult to prove.

    

3. You can sue the Seller for specific performance. This is the "equitable remedy" referenced in paragraph 26 of the Sales Contract.

What is specific performance? Oversimplified, you ask the Judge to order that the Seller be directed to sell the property to you.

There is an interesting case involving singer Roberta Flack which gives attorneys guidance on how the courts will respond to such suits. In Flack v Laster, the District of Columbia Court of Appeals explained that "specific performance of a contract is ordered when the legal remedy, usually money damages, is deemed to be either inadequate or impracticable. When land is the subject matter of the agreement, the legal remedy is assumed to be inadequate, since each parcel of land is unique; thus equitable jurisdiction in this case is firmly established."

The Court went on to state:

A purchaser seeking specific performance must show that he was ready, able and willing to perform the contract. He must also show that any delays were not caused willfully by him, and that the seller was not harmed by the delays. Where no time is specified for the performance of an act, the law implies that it must be done within a reasonable time.

Litigation, of course, is always time consuming, expensive and uncertain. Should you decide to file suit, make sure that you also request that the Court grant you attorneys fees should you prevail. Our Courts follow what is known as the "American Rule" on attorneys fees, namely, each side pays his/her own lawyer, unless there is a specific law authorizing such fees (such as a consumer protection act) or there is a contract between the parties which requires the losing party to pay those fees.

In the Regional Sales Contract, paragraph 24 specifically authorizes such fees to be paid to the prevailing party.

Question (TX): We bought our home one year ago. We immediately discovered the house was infested with scorpions. We attempted to correct the problem and discovered that eliminating scorpions is impossible. The scorpion infestation was not disclosed to us by the previous owner and they were aware of the problem. Were they required to disclose the scorpion problem?

Answer: If one has to ask whether or not it should be disclosed, then it should be. The rationale is that any material fact regarding a property's condition that a typical purchaser would want to know should be disclosed. The reasoning is that if such a condition would negatively influence the purchaser's decision to buy the subject property, then the purchaser might bring a lawsuit against the sellers predicated upon the argument that "had we known about [insert the reason here, such as "scorpion infestation"] we never would have purchased this property."

As to the scorpion infestation itself, did you have a pest control professional inspect the property prior to your buying it? What did he or she tell you about the scorpion infestation or did the inspector miss it? Have you had a licensed, pest control professional tell you that you cannot remediate a scorpion infestation with pesticides? Such advice would seem to confirm everything we've read about scorpions. Sealing the perimeter and slab areas of a home to prevent scorpion access appears to be the only way of dealing with the pests, unless some readers know of viable (and less expensive) methods. (scorpion specialist; newszap article) Question (CA): My wife and I are currently in the process of purchasing a home through a private party. On the California Association of REALTORS® ("C.A.R.") form there is a question on line 4E regarding transfer of County Tax and transfer of City Tax. Who usually incurs this cost?

Answer: We presume the form to which you refer is the California Residential Purchase Agreement (RPA-CA). If it is not, please let us know. We also assume that your question deals with transferring the County and City records to your name (i.e. fees) and not a pro-ration of actual property taxes. Most items in a residential purchase agreement are, or can be, negotiable between the Parties as to which one pays. I say "most" because there are exceptions. For example, FHA and VA loans have requirements as to which closing costs buyers are allowed to pay. When you ask the question "who usually incurs this cost," it appears to us that the sellers are asking you to pay the cost of changing the County and City records to your name. If they are, that is not an unusual request.

However, as in any negotiation, you've got to ask yourself if the specific point being negotiated is a deal breaker. If it is not, then chalk one up for the seller's side. If it is, then seek to find another cost that the seller would be willing to assume in exchange and if the seller is not willing to assume any cost in exchange, then walk away from the deal. Question (OR): I represent my buyer and we have an accepted offer on a home. The listing agent calls me today and says his seller would like to do a rent back, or extend the closing date about 13 days. My buyer, who has made vacation plans, has family coming into town, and also has other engagements, does not want to do either. He is happy with our closing date (which by the way the sellers picked) and firmly wants to stick to it. The Listing Agent tells me that I am not trying to create a win-win situation that either we take the deal or the seller is going to back out of the deal. I think he may be bluffing, because the seller has signed a contract to purchase a new home and obviously needs to sell this one.

The funny thing is we have only been creating a win-win situation. My client accepted the seller's counter offer fully, with the seller's chosen closing date. My question is can the seller back out of the deal without facing any recourse. My buyer has already spent money on property inspection and is in love with this home. Answer: No, the seller can't unilaterally back out of an enforceable agreement. This is a situation that is a people problem, not a legal one. The seller has signed a contract and now doesn't want to live with it. Subject to your client's approval, prepare to go to closing and send a letter to the seller (through his agent) demanding him to close, and get on with it.

Question (VA): We plan to sell our home in Virginia and have been advised to sign a Disclosure Disclaimer form, but not because of the condition of our home. We have no defects to hide and are offering to pay for a home inspection. We are concerned, however, about various municipal improvements that have been proposed for our area, but have not been officially approved. If later approved, these improvements could involve customer fees up to $1,300. The final approval is delayed right now because some residents in our area are contesting these proposals and tying up the process. Unless we do a great deal of research, we cannot possibly know everything the city has planned for our area in order for a full disclosure. In such a case, if a disclaimer is signed and later improvements involve fees, can a seller be held responsible for non-disclosure? Can sellers in disclaimer states like Virginia be held responsible for future costs imposed by the city, when we had no official notice of them before our listing/closing? The bottom line is this, does awareness of a potential municipal fee translate into enough knowledge of an official fee that it warrants disclosure? Also, in a Buyer Beware State like Virginia, isn't it up to the Buyer and his Buyer's Agent to find out stuff like this before submitting a contract for purchase, since it's all a matter of public record? We've been told this by a friend who dabbles in real estate.

We don't want to scare away potential buyers with talk of "potential municipal improvements and possible fees," but also don't want to be sued for non-disclosure in the future for not giving a buyer the head's up on the matters at hand. Answer: First we must say that a friend who "dabbles" in real estate is not a reliable source of information upon which to base the sale of your home. You are far better off when you hire a seasoned and licensed real estate professional who will commit to handling the many details from listing your property for sale up to and through the closing process. And, if necessary, an attorney to explain any terms and/or contract provisions that you do not clearly understand.

You should sign the Residential Property Disclaimer Statement only if you truly believe you have nothing that should be disclosed on the Residential Property Disclosure Statement. You can always disclose the "proposed municipal improvements as you understand them to be," as a note that is a referenced part of your purchase contract. The fact that you as property owners are aware of a potential $1,300 fee or a fee of any amount that "might" be levied upon a potential buyer at some unstated time in the future - provided it is passed, is a whole lot of suppositions coming to fruition. Still, disclosing your awareness is a good thing. It helps you sleep at night knowing that whoever buys your home had informed consent about the potential of the municipal fee.