Help, this guy wants to take me to court. Does he have a case?

My wife submitted an offer on a house via email. The offer was accepted. However, with more due diligence, we do not want the house. We have not signed any paperwork, nor has any earnest money been given. We did discuss that we would get a loan for the home, and that we would close within 30 days. This guy is a wholesaler. Does he have any type of case?

Thanks in advance.

No he has no case

It’s very possible. It depends on what you wrote and if you had an escape clause like “offer conditional on financing at a rate acceptable to you” or “conditional upon satisfactory inspection”. Just because you agreed to it over the Internet and did not sign a piece of paper or give earnest money doesn’t necessarily mean it’s not a legal contract.

To be legally binding, a contract needs two essential components: 1) an agreement and 2) consideration. You agreed to close in 30 days for ‘x’ amount. It passes that test, does it not? Even verbal contracts are legal, but they have to be proven they exist in court, which is difficult. An e-mail proves it exists.

I’ve bought property off e-bay before without ever signing a single paper document or putting down earnest money or having a witness. I bid. A screen popped up that said my bid was a legally binding contract if I bid. I clicked I agree. I won the auction. I sent them money through Paypal and several days later they sent me an electronic deed.

Please double check with your local lawyer before taking advice off this forum.

but what could he get out of me? He can’t force me to get a loan and buy the house right? When this typically happens, then you lose out of your earnest money. In this case there was no earnest money. What are the possible repercussions?

The law’s on your side. Buyers don’t have to buy, but sellers do have to sell.

In your case, the seller is threatening to sue you for what’s called, “specific performance.”

This is unusual for a seller to do. Why? Because it will require an attorney, and about five to ten thousand in legal fees, and the attorney will tell them that they have no case.

Meantime, yes, it’s possible for the seller to sue you. Probable? No …unless he’s got thousand of dollars to burn …and again, lose.

Now, let’s just say you tried to buy his house, and you could not get financing, or the appraisal came out short, or a myriad of other reasons you could not close. You would lose nothing, and would not be liable for specific performance (all things being legal and equal).

You are setting yourself up for a loss (losing the earnest/binder deposit) when you do not have any contingency clauses included in your contract.

Frankly, professional REO investors will often write offers that have no contingencies, because they’ve already seen the house, “gathered” estimates; and have the comps and the money ready to close.

In other words they’ve done all their homework, and are now telling the bank that they’re ready, willing and able to close on the deal at the price being offered. This eliminates 94.004565% of the competition.

Let me tell you what some of the whales do out here in California on these REO offers. They’ll not only remove all the contingencies, but make their earnest/binder deposit equal to the purchase price… And if the bank accepts the offer, the deposits are cashed in full.

This really puts those who are trying to give themselves ‘options to buy’ by giving themselves time to line up money, or whatever they’re needing time to do, at a complete disadvantage.

That’s reserved for competing in the open market for bank owned properties.

The competition isn’t nearly that stiff in ‘off market’ deals.

Meantime, you should either know your market better; or be a better estimator; or insert an escape clause in your offers, or have your money ready, so that you’re not pulling your punches on these deals. Just saying.

Thanks javipa for the info.

This is the first time we have ever done this. The problem with this whole thing is we got too emotionally involved. This was a home for ourselves to live in, and it wasn’t necessarily an investments property. I’ve learned a lot from this deal. Usually I can eyeball a home and know what it’s worth. When I dug deeper into this area, I realized that I do not always know… and I need to continue to do my due diligence and do all my homework.

So I shouldn’t have anything to worry about… He hasn’t even been talking with me; only my wife. He’s just trying to bully us into closing this deal.

Wrong. You do have something to worry about. I’ve talked to several real estate lawyers I do real estate transactions with who’ve defended clients in small claims court cases and lost in what they thought were slam dunk cases against unrepresented litigants. So WATCH OUT!

Small Claims Court Judges are very unpredictable and litigants do not have to hire a lawyer and pay $5-$10K in attorney fees. It’s the People’s Court: they can represent themselves, spending around $175.00 in filing fees (at least in my area), and they’ve got nothing to loose if they’ve got the legal elements of a contract and your state law does not forbid these kind of real estate contracts, which is a question only your local lawyer should be answering. He could be on the hook for some of your costs if it fails, but it all depends on the laws in your state if he has a legal case or not. He could sue you for damages and win.

You could probably get small claims court judgments overturned on appeal, but now you have to hire an appeal court trial lawyer at $20K+. You can’t represent yourself in appeals court and expect to win. How much will YOUR attorney fees be then?

Seriously, go discuss this case with a lawyer on your options and quit taking advice from this forum at face value. You might be better off giving him some money to go away. If you loose a lot of money defending yourself in Small Claims Court, do you think Javipa is going to give you a dime towards your legal fees or losses in court? I’m sure he won’t even know you anymore.

You can’t be represented by an attorney in small claims court.

Attempting to sue for specific performance in small claims is ridiculous.

If you’re being sued for specific performance, you’re being sued for the amount of the sale price, which by definition cannot be litigated in a small claims court.

MC, what is the seller saying his ‘damages’ are? I mean really, how is he damaged?

Unless you made/make it impossible for him to sell to someone else, or caused him to do repairs, or pay for some contractual items, and then failed to close, he doesn’t have a leg to stand on.

What I sense here is that the seller thought he had a sucker on the line, and then was disappointed that you ‘let go’.

You have zero to worry about here.

What are you talking about?! I personally know several real estate lawyers who represented clients in small claims court over real estate matters. Where are you getting your information from?? Being represented by a lawyer is option, but not required. I have also personally sued people in small claims court unrepresented, while the other side was represented by a lawyer.

Specific performance is not the only thing he can sue for (unless there is specific state law restricting it).

As for damages. For one, the wholesaler’s damages will be his markup. If he marked the property up $10K on an optioned property and loses that option because of the time he lost, guess how much he can sue in small claims for? All he has to say is he had another serious buyer B who ended up putting a firm offer on another property through someone else because he took a firm offer from buyer A. He lost buyer B because of buyer A’s firm offer. He can no longer go to buyer B. And the wholesaler’s option time is running up and he may not have enough time to get a firm offer from someone else because the wholesaler’s option period ended. That is the wholesaler’s damages.

Real estate agents can also sue the buyer for their commission when a deal has been firmed and doesn’t close because of the buyer’s negligence in a similar fashion. That is Real Estate 101, taught to me in Real Estate College when I went to become a licensed realtor. It’s nothing new. I’ve been a real estate investor for over 17 years. I know how it works.

I would recommend before advising someone regarding how the small claims court law is regulated is to find out what state they live in first. For example here is what the California says.

Other states may have a different view on the same law.

John $Cash$ Locke

What you’re saying is not true in every state. Even so, what is possible, is not probable.

Professional wholesalers don’t get hung up on a buyer who doesn’t perform. He just moves to the next buyer, or gets himself out of the deal.

That doesn’t mean that MC is dealing with a professional, of course, but the less professional the wholesaler is, even less likely the guy has the resources to force a sale.

It all comes back to the premise I offered that ‘buyers don’t have to buy, but sellers have to sell.’ This hasn’t changed one wit.

Dave, I respect your opinions here and don’t care to get into a spitting contest over what your attorney-buddies are telling you will/might happen, or not, with an amateur’s deal-gone-bad.

So, for the sake of discussion, MC can be warned that he’s putting himself at risk, by not following through on contracts he’s committed to in writing.

Otherwise, I’ve been at this game a while, and backed out of a share of contracts, because I didn’t know my market, didn’t know what I was doing, didn’t find the money, and what not (not recently, thank you, but…).

At the same time, I’ve lost count of the buyers that bailed on me.

I’ve even had a buyer sue me to get his $2,000 earnest deposit returned, which I refused to return, because he was outside the limits of his ‘weasel clauses.’

The buyer was ‘wholesaling’ my deal, and shopping for his own money, and couldn’t find it. …The judge awarded him the money.

Again, the axiom that, “Sellers have to sell, but buyers don’t have to buy” come true.

Oddly, the buyer never recovered his deposit from the title company, after we released it. The money was ultimately transferred to the state fifteen years later, and we later learned of the waiting claim ‘owed to us’. Sure enough, we got a check in the mail.

Which brings me to my last point; either put up a huge deposit, or a tiny one, but not an ‘in between one.’

Meanwhile we don’t leave ourselves open to liability by not having at least two, or three, legitimate ‘outs’ in our non-REO purchase agreements.

The wholesaler who is doing this deal said he has a contract on the property for an entire year, and he just got it so there should be no problem for him losing a deal b/c his time on the contract is over.

In kansas, we have the following statue That right there should be a good out regardless of what he says.

I have contacted my attorney, and, hopefully, he is squashing things right now.



Consider using an option agreement like the one I’ve attached below.

It gives you the option to buy, but not the obligation. It can be for whatever time-frame you want.

The example is for only 30 days, so you’ve got about four weeks to get your act together without losing anything.

The really great thing about this is that you’ve got 30 days to either crap, or get off the pot, regardless of what else you do.

You’ve only got 100 bucks to risk. So, if the deal wasn’t what you hoped it would be, you just abandon your option, and give up the 100 dollars.

Of course, using this, the Optionor/Seller will need to be ready, willing and able to wait while you screw around on his time, and risk that you won’t close.

However, that’s the same risk he takes when he signs a purchase and sale agreement. Why?

Because if you’ve written the purchase and sale agreement correctly, it’s effectively an ‘option agreement’ anyway. The only differences are that you’re starting with a purchase agreement itself, with a refundable deposit.

With an option, you forfeit your consideration by default if you fail to close.

So, the option more or less signifies a higher level of seriousness, than a simple purchase offer agreement. You actually have something to lose if you don’t perform on the option.

So, options are more powerful offers.

Take note of option consideration in the sample document. It’s only 100 dollars.

I know others on this board recently mentioned that they give sellers 1/10th of that to seal their deals. You do whatever you can negotiate.

Good man.

Just to update everyone, my attorney sent my accuser a letter, and we haven’t heard anything since. He has been re-marketing the property so I’m assuming that everything is over.

Thanks everyone for the advice. It was much appreciated!

Just one final two cents. It is possible for a seller to sue and win. The reason it is not done often is it just isn’t worth it, mainly because as been stated the seller must prove damages and if they sell it to someone else at a ballpark price their losses are not that big.

I know two sellers that insisted on suing because the money was enough in one case, and it was the principle in the other, these were two clients of mine when I was wearing my brokers hat, but no agents were involved in these deals. They both won because the court ruled they were entitled to the benefit of the bargain and they were damaged. But then comes part two, they get a judgment but they still have to collect, and we know what a hassle that can be.

Just popping in to say good luck with this! Everything will turn out fine. :slight_smile: