HELP!?!?! - Posted by brian

Real Estate Investing
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Re: There is a written contract. - Posted by GL

Posted by GL on December 03, 2001 at 06:57:40:

First of all there does not have to be anything in writing for there to be a contract. For example you could rent an apartment without a lease and the tenant has rights under the law the same as if there was a written contract because there is a contract.

For there to be a contract all there has to be is an offer, an acceptance and a consideration (payment).

All a written contract does is furnish proof of what was agreed. If you can prove what was agreed without writing then you can enforce a contract.

In this case there is a written memorandum on the check.

When a case goes to court the plaintiff must first put his case to the judge. After the judge hears the plaintiff’s side he then hears the defendant’s side. They do not converse back and forth. If the buyer sues, he must prove that he gave the money to the seller. What proof does he have other than the check? He can’t stand up in front of the judge and just say he owes $5000 with no proof. If he does, the seller can say, he has no case. He hasn’t proved anything.I don’t have to say anything.

If it were me I would tell the buyer that I am sore as hell, he welshed on a deal and caused me to lose a good sale to another party. Now I have to start over again, lose my time and expenses of advertising and carrying the property until I sell it, which won’t be until who knows when, and who knows what offer I will get. I could take him to court and force him to go through with the deal. His excuses for backing out are so flimsy they are ridiculous. So I am keeping the money as damages.

If he wants to sue let him go ahead. He has no proof he ever gave me a cent until he shows that check, and when he does he proves there was a real estate deal that he welshed on. At that point he either has to go through with the deal or I can sue him for damages.

Anyone would be nuts to go to court with a case like that. If he wanted to I would say go ahead, I’ll see you in court. We already know the guy is the type who gets all fired up then never follows through. You would never hear from him again.

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Re: There is a written contract. - Posted by GL

Posted by GL on December 03, 2001 at 07:07:09:

Anything pertaining to real estate DOES NOT have to be in writing to be binding. You can rent an apartment with no lease, nothing in writing and you have a binding contract under the law.

All you need for a contract is an offer, an acceptance and a consideration.

In this case the check was written by the buyer, and all notations are in his handwriting. This proves that he knew what he was signing and the notations were not added later.

All I can say is, if the buyer went to court with that check he would have to admit there was a real estate deal or look like a fool. How could he show that check then claim there was no deal? Why did he give Brian the check then? And without the check how can he prove he gave him any money?

Believe me if Brian tells the guy off and keeps the money he will never hear from him again. Nobody would go in front of a judge with a case like that. Put yourself in the buyer’s place, knowing you are in the wrong, and imagine twisting yourself into knots trying to put over that pack of lies to a judge.

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Re: There is a written contract. - Posted by Tom(Dallas)

Posted by Tom(Dallas) on December 03, 2001 at 09:02:14:

You are correct when you say that an agreement does not have to be in writing. Each party can say that we have a verbal agreement and everyone can be happy. So long as there are no problems. There is nothing to prevent those parties from going ahead and closing on the deal even though it was a verbal agreement. However, when there is a dispute, a verbal agreement is NOT enforcible. The courts have nothing to go on other than the word of either party and they simply will not do that.
Another element that has also not been mentioned is that an open-ended contract is not enforcible. It must have a close to it, in other words, when will the property close and what happens to monies deposited if it doesn’t? Without these elements, even a written contract is not fully enforcible.

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Re: There is a written contract. - Posted by Bill Scott (Ohio)

Posted by Bill Scott (Ohio) on December 03, 2001 at 07:14:53:

GL, you are wrong about the verbal contracts. ALL real estate contracts MUST be in writing to be enforceable. That is a very old rule dating all the way back to the time of Blackstone. If you have a verbal agreement with the tenant, it is NOT enforceable. The court is only going to recognize a month to month lease, even though you and the tenant have verbally agreed to a year.

Furthermore, saying that all is needed is an ‘offer, acceptance and consideration’ is a bit simplistic as well. You had better have what lawyers refer to as ‘QTIP’ in your contract as well if you want a court to enforce the deal. QTIP stands for ‘quantity’ ‘terms’ ‘identity of the parties’ and ‘price’.

And yes, I graduated from Western State University, College of Law, Fullerton, CA. class of 1993.

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Re: There is a written contract. - Posted by GL

Posted by GL on December 03, 2001 at 07:35:05:

Let me ask you this. Suppose Mr. Buyer came into your office and told you that he had agreed to buy 2 houses, and given the seller a check. Then he changed his mind because interest rates are too high and he didn’t know how much they would rent for. Now he wants his money back but the seller wants to keep it, and threatened to sue for damages and specific performance. What would you do? Would you take a case like that to court?

While we are at it, what about Brian? If he were your client would you advise him to give the money back?

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Re: There is a written contract. - Posted by Bill Scott (Ohio)

Posted by Bill Scott (Ohio) on December 04, 2001 at 04:09:58:

GL, if this case goes to court, the court has two options to solve this. The first is an 'at law’decision—by looking at statutes, and prior case law. The second, and what would probably decide this case is ‘at equity’----doing what seems right.

In this case, I can’t see any way that the seller would get to keep the entire amount. The court would probably demand a return of the refund, minus any provable expenses that the seller could provide.

Don’t forget that this could all have been avoided if the SELLER had done what he should have----had a WRITTEN CONTRACT with the TERMS including how the deposit would be handled, written out and signed by both parties! The seller CAN keep himself from being jerked around by a buyer IF he knows how to write a tight contract. If the seller doesn’t know how to do this, find a knowlegeable realtor or attorney to do it for you!

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Re: There is a written contract. - Posted by JohnBoy

Posted by JohnBoy on December 03, 2001 at 09:40:11:

There would be no case other than the buyer having a case to get his money back.

As far as the seller’s side, there are two choices. Either let the buyer take you to court and lose, or give the money back now and save yourself from having to go to court and drap this out. The only way the seller wins is if the buyer doesn’t take it to court to get his money back. Over $5k I somehow doubt that will happen! But you never know.

You can argue this until you’re blue in the face. Bottom line is, if this goes to court the buyer will prevail because there is NO written contract and there MUST be a written contract to be enforceable pertaining to real estate!

Sure, you can rent a place without getting a lease signed. But as soon as you have a problem you have no written lease to back anything up with. Anything verbal won’t stand up. The tenant would have to be evicted from the property if they won’t leave and you want them out, but that’s because the tenant is in possession, not because of any verbal agreement.

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Re: There is a written contract. - Posted by GL

Posted by GL on December 04, 2001 at 08:08:28:

That is a good answer but it is not the question I asked.

The question is, if Mr. Buyer came into your office and told you the story as we know it: That he made a verbal agreement to buy two houses, paid a deposit, then changed his mind because interest rates are too high and he doesn’t know what they would rent for, and now he wants his deposit back - what would you tell him? The only documentary evidence is a cancelled check which your client wrote in his own hand, with the date, description of the property, price, deposit and date. This check was then deposited by the seller.

So what would your advice be to this buyer?

Now take the other side. Brian sold the houses in good faith, and cashed the deposit check. He took the house off the market and turned down a better buyer. Then the first buyer called him up and told hime he changed his mind because interest rates are too high and he doesn’t know what the houses would rent for. Brian refuses to give the money back.

What do you advise him?

I was involved in a similar case a few years back. My mother sold a farm to a developer in 1989 for $2,000,000. The deal was set to close in April 1990. In the meantime the developer tried to flip the property for $3,000,000. But the real estate market went soft and he didn’t get away with it. So he refused to close.

We sued him for specific performance and damages. He got lawyers and fought the case all the way to the supreme court. In the end he lost. In total, with damages interest and court costs we got judgement for $3,600,0000. He must have spent another $1,000,000 on lawyers. The last we heard he was suing the lawyers, presumably for leading him up the garden path LOL.

If you are curious you can read up on the case in the Ontario law review. It is unusual for such as case to be published, but this is the first time a plaintiff pushed such a case so far. Look for Lubben vs. Veltri.

Do you want to hear a funny joke? If he had come to my mother in the first place and told her he changed his mind, she would have torn up the contract. He only put down $10,000 and she would have been satisfied with that. Considering she spent $3000 on a survey plus lawyer’s fees etc. she wouldn’t have cleared much but what the heck.

Even after we started the case we would have dropped it for $25,000 but Veltri thought he could buffalo a little old lady and get away with it. He was wrong. But he thought that he could because he had done the same trick many times before, tieing up a property for months with a small down payment and trying to flip it, then backing out if he didn’t get a buyer.

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Re: There is a written contract. - Posted by GL

Posted by GL on December 03, 2001 at 10:18:33:

Are you saying the buyer has the right to make a deal, tie the place up with a deposit, cause the seller to lose another better buyer, then get out of the deal on any flimsy excuse, and get his deposit back with no penalty?

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Re: There is a written contract. - Posted by Tom(Dallas)

Posted by Tom(Dallas) on December 04, 2001 at 08:49:36:

Great story!
Nothing to do with this guy’s problem though since your mother had it in writing.
It seems that in most of these posts, people are jumping to the conclusion that this buyer was buying the property totally non-contingent, without anyway to get out of the contract. Now, even though this verbal agreement is absolutely unenforcible, it seems to me and probably likely, that the buyer may have even uttered the words ‘I just want to check it out’, or something along those lines. Given this possible scenario, the seller would not be entitled to any of the earnest money. Earnest money is earnest money unless it is deemed in the contract as non-refundable or forfeited should the buyer not fulfill their end of the contract. Now, who can say that the buyer did not utter those words, even if the seller did not hear him. Maybe the buyer thought the seller did hear him. All this points up to is why the states require that contracts be in writing if they are going to resolve these disputes fairly. Anything else is wishful thinking.

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Re: There is a written contract. - Posted by JohnBoy

Posted by JohnBoy on December 03, 2001 at 14:01:08:

Without a written contract, YES!

The seller can also back out by refusing to sell since there is no written contract! So it works both ways! Without a written contract neither party has a leg to stand on!

It doesn’t matter what either party verbally agreed to. The LAW is clear on this matter. ANY real estate transaction MUST be in WRITING to be enforceable, period!

If you and I verbally agree to anything pertaining to buying real estate, either one of us can change our minds at ANY time and cancel our verbal agreement! There is NOTHING you can do about it!

We could both stand in court and admit to everything we verbally agreed and it still wouldn’t be enforceable without a written contract when it involves a real estate transaction, should either one of us change our minds about something!

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Re: There is a written contract. - Posted by John - CA

Posted by John - CA on December 03, 2001 at 10:47:12:

In California, unfortunatley yes.

In a standard real estate contract in CA, huge steps have been taken to protect the buyer, giving a multitude of weasel clauses. I can make an offer on a property and tie it up for months without closing the sale and still get my EMD back.

Nature of the beast in the Golden State.

John.

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You still haven’t answered the question. - Posted by GL

Posted by GL on December 04, 2001 at 09:44:32:

As an attorney what would you do in each case?