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Brad comments today on intentional buyer default.

This week, a TRR associate came to me with a problem. Seems that her buyer wanted to cancel a purchase and sale agreement on the day of closing. But the agent was not clear about the reasons, so she asked for my assistance and intervention.

I talked to this buyer, who was extremely hotheaded and emotional. He said he wanted out of his contract for myriad reasons. I told him that I was happy to help him if there was a legitimate problem, so he needed to tell me what was going on.

The buyer went on (seemingly forever) grasping at straws as to why he should not have to close escrow on the property. First, he mentioned that he was not comfortable with his agent. Yet, it turned out, this was the third property he was buying from the agent; two had already closed months earlier.

Then he said that the agent rushed him to sign the closing documents. But the closing date, which the buyer originally requested, was the day the agent asked him to go to the title company and sign. I don’t think signing on the last possible day constitutes being rushed.

Next, he said that after he put the property under contract, the electricity was disconnected in the house, and his inspection was delayed. In Nevada, the standard purchase and sale agreement contains language that says if any utility is not in service at the beginning of the due diligence period, that period is automatically extended by the same number of days it takes to get the utilities reconnected. So, no problem there.

He also said that he was not pleased with the home inspection. But he signed a document after the inspection that the condition of the property was to his satisfaction, and he intended to close.

This guy threw every possible thing at me, but none of them was legitimate in any way. Then, he hit me with one more.

He said that just before the closing, he did some research and discovered that a year prior, the property was sold to the current owner for less than he was paying, and that was not fair.

Come again?

He was upset that he was paying more than the last owner paid? That’s his reason to cancel?

First of all, what someone else paid for the property at some other time, under some other circumstances, is completely irrelevant. Maybe the house was trashed, who knows.

Second, what if he was paying less than the current owner originally paid? Would he have felt bad about that? Would that be a reason for the seller to cancel?

Third, after doing some research of our own, we discovered that on the two other properties he previously bought, he paid much less than the sellers had originally paid. So does that mean he owes them money now?

Fourth, he had the opportunity to conduct an appraisal, but he decided to waive it.

This is a false argument, a desperate attempt to get out of a legally-binding contract. He could not give me one single reason that he should be allowed out of the agreement. Not one.

When he signed the contract, he agreed to pay a certain price for the property, and that’s the price. Period.

A contract is a contract is a contract. It must be honored. My regular readers know that I am a firm believer in the sanctity of the contract.

He then had the gumption to tell the agent that she should fight for him to get his earnest money refunded. This on the day of closing, mind you!

I tried to explain, between his rants, the ramifications of failing to close on the purchase. I informed him that his deposit would most likely be forfeited, and he could be facing legal action against him.

And then, he said something that made me just so incredibly angry.

He said, “If someone wants to sue me, go right ahead. I am a foreigner; they can’t do anything to me”.

That made my blood boil, for sure.

This buyer knew what he was signing when he signed it, no question about it.

As of this writing, I do not know the outcome, whether he signed the closing documents or not. But I will update this blog when I find out.

I hope that this buyer does the right thing and signs the deal as he contracted to do. But if he does not, I hope that the seller does not go easy on him. After all: he is screwing the seller, the two real estate agents, the title company, and everyone else who worked on this file for free. This might not be a very nice thing for me to say, but if he does not sign, I hope he loses his deposit and learns a valuable lesson. After all: if we are not going to honor the contracts that we sign, then there is no reason to sign them. If ever there was a case that deserves punitive action against a buyer, I do believe this is it.

Date posted: October 29, 2010