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Sellers have recourse when buyers back out

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POSTED December 16, 2011 1:26 a.m.

DEAR BENNY: We recently had a contract to sell our home to a “cash” buyer. He and his wife were allegedly inheriting a large sum of money, and their Realtor confirmed that she had seen the bank account statement confirming a “vast sum of money,” reportedly well in excess of our contract price.

We closed our half of the deal and moved out of the home, only to discover that on their closing day one week later, no money could be produced. After a litany of alibis from them trying to explain what happened, we were forced to relist the home and sell it for substantially less money.

Of course, we have an attorney, but we have been told that the buyers’ Realtor holds no liability, even though she could not produce written confirmation that the money was in the account, as stated.

Our state allows us to file suit against the buyers for the difference in the selling price along with carry costs. It’s hard to believe that something like this could happen. Do you have any thoughts or recommendations on this case? --Anthony

DEAR ANTHONY: Generally speaking, when a buyer defaults on a real estate contract, the seller has three alternatives:

1. Keep the earnest money deposit. I hope that you had a large deposit from the buyers. I generally recommend a deposit of no less than 5 percent -- and often as high as 10 percent -- of the contract purchase price;

2. File suit for damages. As you have indicated, if you ultimately sell the house for less than the original price, that is one element of your damages. You can also claim any additional mortgage payments, taxes and insurance that you had to pay after the day that the house was supposed to settle.

And if you have to get a higher-interest-rate mortgage as a result of the delay, that is also a measure of damages.

3. Sue for specific performance. This means that you ask the judge to force the buyer to complete the purchase. Obviously, this works only if the buyer really has money or the ability to get a mortgage loan.

Litigation is time consuming, expensive and always uncertain. Discuss the pros and cons of each remedy with your attorney, and make sure you understand your financial obligation involved with any litigation.

Do you have a complaint against the broker’s agent? State law will control, but if that agent lied to you about the financial status of her clients, you clearly have the right to sue her or at least file a complaint with your state real estate commission. Of course, proving what she saw may be difficult.

Bottom line: In the real estate industry there is a concept called “buyer’s remorse” -- namely that many buyers change their mind after signing a binding real estate contract. That’s why I always recommend that sellers get as large an earnest money deposit as possible. You want to make it financially difficult for the buyer to walk away.

DEAR BENNY: We are trying to help my mother-in-law with a rental property. Is there a state or federal law that mandates that a rental property have an air conditioner? Is there a requirement for a home to be repainted after a tenant moves out? I know the morally right thing to do, but I was wondering what the law says is mandatory. --Dan

DEAR DAN: Landlord-tenant law is governed by individual state law, although many local cities and counties also have laws that control the relationship between landlords and their tenants. To my knowledge, there are very few federal laws in this area. One that comes to mind relates to foreclosures: the Protecting Tenants at Foreclosure Act of 2009.

Basically, this law makes it clear that when property is foreclosed, existing leases cannot be canceled prior to the termination date in the lease. And for tenants on a month-to-month lease, they must be given 90 days’ notice to vacate. However, if the purchaser at a foreclosure sale actually intends to live in the property, the lease can be terminated early with 90 days’ notice.

It should be noted, however, that the federal law allows stronger state tenant laws to apply; the federal act will not pre-empt those laws.

You will have to determine whether there are any laws in your state regarding painting and air conditioning. Many states (or local governments) have landlord-tenant offices and many have literature that may be of assistance to you.

However, you used the word “moral”; yes, there is a moral obligation on the part of the landlord to be human and understanding of what tenants want. But, in my opinion, there is a more important word, namely “business.”

If the house needs a paint job, you will not get tenants to pay the rent you are asking. If you are in an area with excessive heat, it makes good “business” sense to at least get window air conditioners.

DEAR BENNY: I live with my girlfriend at her house. I am trying to fix our backyard and we have a neighbor behind us with a 100-year-old oak tree. There are two main trunks of that tree hanging over our fence line. A main trunk and top canopy is 40-45 feet over our property. It hangs over our house -- and to make matters worse there is a visible crack and you can see the water line below that crack.

We went to an attorney and he sent a certified letter to the neighbor stating not only that it is a nuisance but the roots of the tree are encroaching on our property and has damaged our fence and the foundation of our property.

Of course, they went to their attorney and made up all sorts of lies.

We have pictures of everything. Do you believe that if I ask my attorney to file a nuisance claim against them, a judge will see it our way? We cannot go outside and enjoy our property with family or friends because of the damage that the oak tree does. By the way, acorns fall in our yard every other day and I have to bag approximately three to four bags; each bag weighs around 100 pounds.

Can a judge order the neighbor to remove the trunk and root system out of our yard so we can enjoy it? I do not want the whole tree cut; I just want what is inside of our property removed. --Paul

DEAR PAUL: I can appreciate your anguish and frustration over this matter. However, I am surprised about the advice provided by your attorney. While he wrote the appropriate letter to the neighbor, the fact is that in every state in this country, “self-help” is permitted.

That means that you have the absolute right to cut any tree roots that are in your property, and can cut down any tree limbs or branches that overhang onto your land. You cannot, however, trespass onto your neighbor’s property.

However, what do you do about the situation in which cutting the roots kills the tree, and then if it falls can cause damage to person or property?

I had a similar case years ago with a large walnut tree. My clients filed suit against the neighbor claiming private nuisance, and the judge ruled in my clients’ favor.

My clients got some money for the damage to their garage (which was caused by the encroaching tree roots) and to pay for the removal of those roots. However, because everyone wanted to save the tree, the neighbor was forced to secure it so that it would not fall should it ever die because of the cut roots.

Tree law around the country is evolving. While every state allows a property owner to exercise self-help, some courts have modified this by holding that if self-help causes the neighbor’s tree to die, the tree owner must be compensated by the person who cut the branches or roots.

I suggest you have your attorney determine and tell you what the law is in your state.

Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column. Questions for this column can be submitted to benny@inman.com.

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