Real Estate Deals Must Be in Writing to Be Enforceable

By Ilyce Glink

Q: The first time my elderly 82-year old mother went to see a house for sale, she gave a check for $500 of earnest money to the listing agent.

When I was questioning her about the home she said the basement had mold up the walls in the basement from a flood. I was very concerned. She did not understand what black mold was and she has serious allergies and is being treated for them.

Because of this conversation, my mother told the seller she was backing out of the deal and purchased another home. The seller came back and told her she had to go through with the purchase.

This is causing Mother great grief. Can a seller really force you to buy their home? I thought earnest money was to be forfeited if you backed out of a deal?

A: First, did your mother sign a contract? Real estate deals must be in writing to be enforceable. Usually, when a real estate broker takes an earnest money check, the buyer has signed a purchase and sale agreement (or purchase contract).

If she signed a contract on the spot, without having an attorney approval rider or an inspection or financing contingency, then the seller may have an action for damages against your mother and her loss may not be limited to the earnest money deposit unless the contract specifies that.

If she had an inspection contingency and had the house inspected within the right time period and it fails the inspection because of the mold issue, she might be able to not only back out of the contract, but also get her $500 back.

The real question is, does your mother understand how to purchase a house? Does she understand enough about the responsibilities of homeownership? If she didn't understand that mold in a basement is cause for concern, what else doesn't she understand?

You should consult immediately with a local real estate attorney to discuss the situation.

Q: I was a buyer in a short sale transaction that did not get bank approval in time, so the contract expired. I decided to not pursue this house, and the realtor, broker and I agreed that I would get my earnest money back.

It has been well over a month and the broker is dragging their feet on sending the check back to me. They keep trying to get me to buy that same property, and I am no longer interested. What are the next steps I can take to get my earnest money back? I am tired of asking for it and being told I will be getting it soon and it never appears.

A: You may have to hire an attorney to make it clear to the seller's agent that you mean business and that the money should be returned.

You say that everybody agreed that you were to get the money back, but did you have a legal right to get the money back? In some parts of the country, buyers are not represented by real estate attorneys and they forget that they must follow the terms of the purchase and sale agreement.

If the purchase and sale agreement states that you get your money back if you are unable to get financing and deliver written notice to the seller of your failure to get financing, and you complied with the terms of the contract, you should get your money back.

However, if you failed to abide by the terms of the contract, you might be in trouble. Just because you have a verbal understanding that you should get your money back, the seller could still come back and say that you failed to abide by the terms of the contract and shouldn't get the money back. A real estate attorney can give you more information on this issue.

In the meantime, if you have a legal right to get your money back because you either complied with the terms of the contract or have written proof that the listing broker and the seller agreed to give you the money back, you should be in daily contact with the managing broker of the listing agent's office. If you have to escalate from there, speak to the owner of the company, and then the local Board of Realtors. You can also file a complaint with the state agency that regulates and licenses real estate agents and brokers in your state.

Q: I purchased a home in March. The seller did not disclose any material defects on the disclosure form. However, the finished recreation room in the basement floods. I knew the basement could get damp due to the dehumidifier that was plugged in there.

The basement is carpeted. It has flooded three times since I purchased the property. The owner advertised the room as extra usable space, but it is not habitable due to the flooding. Also, the leak is on the second step along the outside wall, but no one could see it as they carpeted the wall to conceal the problem.

In my view, the seller did not disclose a material defect and he purposely concealed the problem. Do you know of an attorney that will take this case to get the seller to pay for the repairs so I can use the room?

A: In most states, sellers are required to deliver a written disclosure to a buyer identifying all known major defects in a home. Some states have lengthy forms for sellers to fill out, while others may have a one-page form. In some states, if a buyer can prove that the seller lied on a disclosure form, the buyer can recover not only damages from the seller but attorneys fees as well.

Seller disclosure cases often hinge on the buyer being able to prove that the seller knew or should have known about the problem. In your case, you believe that the seller did not disclose a material defect and purposely concealed it from you and your home inspector. If you are correct and can prove it, you might be able to sue the seller and get the seller to pay to correct the problem.

Keep in mind the cost to repair the problem vs. the cost of a lawsuit. I frequently get letters from readers complaining about problems with their homes and claiming that their sellers failed to disclose many things to them. But when it comes right down to it, you need to investigate the problem and determine the cost to fix it.

I have heard from people that have had water problems in their basement only to find out that the water problem was caused by clogged downspouts -- a quick and easy fix. I have heard from other people that landscaped their home after moving in only to find out that the ground was pitched towards their home, causing water to come into the basement. In many cases these fixes were inexpensive.

If you investigate further and find out that the fix for your problem is quite high, then you might want to pursue legal action. In some cases, before you even talk to an attorney, you might benefit from calling your real estate agent to discuss the problem with the seller. You might find that the seller is willing to compensate you from the problem rather than face more calls and aggravation in the future.

One last thing to keep in mind with the current economic situation: If you bought in a short sale from a seller who lost his or her job, even if you have a rightful claim against the seller, if the seller doesn't have the money to pay to repair the problem, you might get stuck with not only the repair but also with a large legal bill.

Have a discussion with an attorney who has had experience (and success) in suing over seller disclosure. While the attorney's fees are often recoverable, most attorneys will not take the case on contingency, which means you'll have to pay the attorney upfront while the suit is ongoing.

If you don't know a litigator who has had seller disclosure experience, contact your local bar association and ask for a couple of names and start there. You can also contact the head of the litigation committee and the head of the real estate committee and ask each of those individuals for help in locating the appropriate attorney.

Ilyce R. Glink's book is "100 Questions Every First-Time Home Buyer Should Ask: With Answers from Top Brokers from Around the Country" If you have questions for them, write: Real Estate Matters Syndicate, PO Box 366, Glencoe, IL 60022 or contact them through Ilyce's Web site, www.thinkglink.com.)

NEWS & CURRENT EVENTS ...

Real Estate | Real Estate Deals Must Be in Writing to Be Enforceable