I got you where I want you…

It appears my obsessive amount of researching may have finally paid off. Emphasis on MAY HAVE, we all know my luck.. but i’m feeling pretty good about what I came across today and what it could mean for us.

In order to not step into something that we aren’t prepared for- i’ve been doing a massive amount of legal research. How to sue, when to sue, do I have a case, real estate law, how much will it cost, etc etc. Going to legal advice forums is a gigantic crap shoot. Typically professionals will not be the ones to respond to you, instead it’s someone who has a bajillion posts, thinks they know everything- and seems to take pleasure in telling you that you’re going to end up spending 30k on a ten thousand dollar lawsuit. Does that not sound absurd? I know it CAN happen, worst case scenario.. but not every scenario goes the way of the worst.
While I did get good ideas on questions to ask the lawyer we are considering retaining.. other than that it was a lot of negativity.
“Well, you signed the contract and that money was a non refundable deposit!”

So what I did today was to research more specific parts of what our contract says exactly.
First thing I looked up was “breach of contract.”
The definition of it is this:
Breach of contract is a legal cause of action in which a binding agreement or bargained-for exchange is not honored by one or more of the parties to the contract by non-performance or interference with the other party’s performance. If the party does not fulfill his contractual promise, or has given information to the other party that he will not perform his duty as mentioned in the contract or if by his action and conduct he seems to be unable to perform the contract, he is said to breach the contract.”

And what happened to us, what the company pulled on us is a textbook definition of that. They promised us title to the house and did not deliver. We secured financing, got the house appraised, and they could not sell it to us. I’m not even sure they were legally ALLOWED to even promise us the title of the house if they never owned it in the first place, but that’s a whole other can of worms.

“Breach of contract leaves the nonperforming or improperly performing party open to a claim for damages by the other party. The non- breaching party is relieved of his obligations under the contract by the other party’s breach. “

Which means the money we put down should be returned since they could not fulfill their end of the contract, right?

Well, they could still claim that our money was “non refundable” or as the contract states “Liquid damages.”
Typically liquid damages only applies when a BUYER backs out and the SELLER is out money because of it. Our case is opposite. The buyer backed out, and we are left with nothing. We already gave them the money. It’s been hard to find anything concerning that, since it happens much less often..
but when I came across this next gem, I knew I had them.

“In many real estate transactions, the seller requires the buyer to pay earnest money in the form of a nonrefundable deposit. Indeed, this procedure is often the best way for a buyer to communicate to the seller that he or she really means business. Although such deposits have been commonplace for many years, a recent court of appeal ruling holds that in certain circumstances a nonrefundable deposit is an invalid form of liquidated damages. For that reason, the court allowed the buyer to reclaim the deposit despite clear contractual language that deemed it “nonrefundable” (Kuish v. Smith, 181 Cal. App. 4th 1419 (2010)). When proceeding to escrow, real estate lawyers and their clients must be prepared to face this new reality.”

And there you have it. But, if I want to take it even farther- I found law websites stating that “liquid damages” could not exceed 3% of the value of the purchase price. That would mean this house would have had to appraise for well over 300k.. let me tell you, it’s not ANYWHERE close to that. Once again making liquid damages an invalid claim.

Breach of contract alone should be enough to set this in stone, but everything I found to more substantiate our claim really puts it over the top.

Unfortunately, just because I know all of these things.. doesn’t mean the company will settle out of court- which is the best option for us. Even knowing that it is almost definite that they’ll lose- they could still want to go to court to argue, meaning we’d have to retain legal counsel.. and have to pay for legal counsel. And while the lawyer estimates it will not cost us over $3,500, that may not account for hold ups.. and definitely does not account for if we win and that turd appeals.

Still, i’m feeling much more confident about our case. Now just to talk some more to the lawyer about what HE thinks our case is (he could be going a totally different route), how strong he thinks it is, fees, contracts, etc.. And to decide how to proceed from there.

Posted on September 8, 2010 by Holdin' Holden 0 Comment
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