Best of the hotline: December 2016

It is my imagination or are we experiencing an uptick of sellers who feel that they don’t have to adhere to the settlement date?

More and more hotline callers are reporting sellers who are experiencing difficulties with their purchases are simply staying put until it is convenient for them to move. The buyer agents who place these calls want to know what they can do for their clients who do not want to look for interim housing and storage facilities.

As I run through the options, I sense that I am losing these buyer agents. They have heard the options before (though I will go over them for you) and aren’t satisfied that there isn’t a better remedy to the situation.

The buyer’s ultimate weapon is to walk away from the purchase. Time is of the essence and nothing in the agreement extends the date of the settlement. It is not much of an option when the buyer has no other place to go and still wants to purchase the property.

The threat of suit to recover buyer’s damages is hardly a better option. The cost of litigating the issue is probably not warranted by the limited recovery the buyer may obtain. Usually what happens is that the buyer finds a relatively inexpensive alternative for housing and furniture storage, often at the hands of friends and relatives. In my experience, it is only worth pursuing in the court when the buyer’s financial losses are extreme.

Because the delays are not usually that long, it makes no sense to seek an injunction or take any other scorched-earth measures.

While I frequently harp about the low deposits that serve as liquidated damages in the event of buyer default, sellers at least have some protection.  And that got me thinking.  Is it possible to exact another deposit from sellers?  It could be available to buyers only when sellers fail to settle on time or cause other undue and extra-contractual delays that cost buyers money. Might it suffice to merely insert a clause in the agreement that provides buyers with a liquidated damage in the event the seller is unable to settle timely? Such a clause could give the buyer the right of terminating the agreement or reducing the sale price by $__ per day. (I am sure it wouldn’t be difficult to come up with an average per diem delay cost that covers housing and storage that the real estate community could get behind.)

No, I don’t think this idea will catch fire!  Liquidated damage clauses are frequently found in commercial and other unique transactions that involve substantial sums of money, a long pre-settlement period, the potential for enormous losses and are negotiated by parties of equal bargaining power. The inertia of the status quo probably means it has no chance in the residential transaction.

Surely there must be some better way of protecting buyers when sellers refuse to settle timely. I’d love to hear your suggestions.