Q: We have signed a non-contingent sales contract to purchase a home, and gave the seller $2,000 as earnest money. Our credit report, which indicated excellent credit standing, was furnished the seller.
Immediately after our purchase contract was accepted we placed our apartment on the market. We were extremely fortunate in finding a buyer and we entered into a contract to sell, with settlement to coincide with the settlement on the house we are buying.
Now our seller wants to withdraw from the conract. We are in quandry.
A: The logistics of buying and selling a house can boggle the mind. All too often, buyers and sellers find themselves trapped because their plans have gone astray.
Ideally, buyers would like to settle on their new houses and have ample time to move in. Needless to say, this is not always possible, since we usually need the proceeds from the sale of our house to purchase the new one.
The second-best arrangement is to have a simultaneous settlement, but rent back your old dwelling from your buyer for a few days to give you the time needed to move into the new one.
However, once you encounter a recalcitrant buyer or seller, the problems begin.
Clearly, you have a contractual relationship with your seller, and there are certain legal remedies you can pursue. The most obvious remedy is to file a suit for specific performance, whereby you ask the court to require that the seller comply with the terms of the contract and sell you the house. In effect, the court is asked to help you specifically enforce the contract.
Additionally, if you have incurred losses as a result of the seller's breach of the contract, many courts will award you damages, in addition to the specific performance remedy. Your damages might include motel or hotel expenses while waiting to move into the new house, additional interest expenses if interest rates go up in the interim prior to settlement, and in some cases, your out-of-pocket legal fees (but only until you file the suit).
Our courts have traditionally followed the socalled "American rule" of legal fees. Each side bears its own costs for lawyers unless there is a law on the books authorizing the payment of legal fees, or if the conduct of the defense is so egregious that as a punitive measure your legal fees will be compensable. The so-called "English rule" awards legal fees to the sucessful party, but our courts generally do not follow that procedure.
I suggest that you discuss this matter first with your sellers, alerting them to your potential damages, and telling them of your proposed course of action. It may only be a misunderstanding, which can be clarified early through face-to-face discussions
If, however, they refuse to discuss this matter with you, I suggest you contact your attorney.
In the final analysis, while litigation is available and may be the only remedy, it is expensive and certainly time-consuming.
Benny L. Kass is a Washington attorney. Write him in care of the real estate section, The Washington Post, 1150 15th St. NW, Washington 20071.