Dealing with a Seller Demanding More Money or Refund Escrow After Contract is Signed

When you are a property buyer and a contract is signed along with the payment of earnest money, the last thing you expect is to face a situation where the seller suddenly asks for more money or even attempts to refund your escrow and take the property off the market. In such a scenario, understanding your legal options and taking the right actions are crucial. This article will explore the steps you can take, with the help of a real estate attorney, to protect your interests and potentially continue with the purchase of the property.

Potential Legal Recourse Against a Seller's Breach of Contract

Given that a binding and signed contract is in place, your first course of action should be to involve a real estate attorney. They can assist you by filing a case against the seller for breach of contract. This is a serious matter that cannot be taken lightly. You cannot simply back out of a binding offer without facing consequences. Consult with both your lawyer and your real estate broker to review your options and determine the best course of action.

Using the "For Performance" Strategy

One effective strategy is to file a "for performance" lawsuit. This type of lawsuit seeks to compel the seller to fulfill the terms of the contract. "For performance" suits are highly successful, as the seller is legally obligated to adhere to the agreement unless they can provide a valid reason for not doing so. Your lawyer can guide you through the process and ensure that all necessary steps are taken to protect your rights.

Reviewing Your Contract and State Laws

To make informed decisions, it is essential to thoroughly read your contract and familiarize yourself with state laws. If you are based in Texas, for example, a standard contract binds the buyer and seller in such a way that the buyer can sue for cash damages or specific performance. This means that if the seller fails to meet the contractual obligations, you have the legal grounds to take them to court.

Steps to Follow if the Seller Demands More Money or Offers a Refund

Send a Letter of Protest: If the seller requests additional funds or a refund, send them a formal letter stating your position. Clearly communicate that you are entitled to the property based on the signed contract and that you will not pay any extra money. Legal Threat and Penalties: Advise the seller that you are holding them to the terms of the contract and that if they do not comply, they will face penalties outlined in the agreement. This shows your determination and commitment to the transaction. File a Notice of Lien: You can file the contract as a lien on the property, which means that the seller cannot sell the property until the issue is resolved. This adds significant pressure on the seller to fulfill their obligations. Consider Alternative Solutions: If negotiations fail, your attorney can explore alternative solutions such as cancellation with compensation. In some cases, a mutually agreeable solution may be reached without going to court, saving you time and legal fees. Seek Legal Assistance for Real Estate Brokers' Fees: If the seller backs out and offers a refund without good cause, your real estate brokers may have earned their commission. Your lawyer can help ensure that you receive the proper reimbursement.

Example of a Successful Settlement

One of the best strategies is to negotiate a mutually acceptable settlement. In a case where the seller demanded a cancellation and refund, the buyer had already incurred significant expenses such as appraisal and inspection fees. They had also given notice on their apartment and were under a contract to sell their home, leading to additional costs. The buyer's attorney negotiated a cancellation that included the return of the buyer's deposit, reimbursement for expenses, and three months of living and storage costs. The sellers were also required to pay both brokers' commissions.

While this scenario ended with the cancellation of the contract, it demonstrates the importance of having a plan in place and a willingness to explore alternative solutions. The key takeaway is that sellers cannot simply back out of a contract without facing consequences, particularly if they breach the agreement.

Conclusion

When a seller tries to ask for more money or refund escrow after a contract is signed, taking the right legal actions can protect your interests and ensure you can proceed with your property purchase. Seek the help of a real estate attorney who can guide you through the process, file necessary legal documents, and represent you in court if needed. Understanding your rights and the steps you can take will empower you to handle this challenging situation effectively.