Consumer Law, Warranties Lease Purchase Agreement

[KatieKatie]

Hello, I entered into a lease purchase agreement with a builder who is operating as a LLC. The agreement required $10,000 in earnest money, that was provided to the builder when the lease purchase term begin, 12/15/2006. The term of the agreement was 3 years and required that the property be purchased at an agreed upon price of $344,000 by 12/15/2010.

The home was foreclosed by the builder's lender on 07/02/2009. The Purchase and Sale Agreement state that earnest money is not refundable under any circumstance, except valid objections to the title and the seller's inability to cure same. Given that the builder is no longer in possession of the title, it seems clear to me that he should return the earnest money. He has taken the position however that since we will be in a materially better position to purchase the house because our lease purchase agreement required a sales price of $344,000, and the bank is willing to sale the home for $192,000, we have no claim to the earnest money he was originally provided. Can you please provide your perspective on this matter?

 

[jharris352]

I'm in Georgia and I have run real estate companies for 15 years.

Observation 1: The builder is bankrupt and has spent your money. Forget him the money is gone.

Observation 2: Contact the bank about buying the property with an FHA loan.

I know that's real short and sweet. Do you have a followup question?

 

[KatieKatie]

Thank you for your reply. In this case, the builder is not bankrupt. I have done a search with the county and the LLC owns other properties and to the best of my knowledge, is solvent. The builder was not delinquent paying the mortgage or taxes. My understanding is that the original loans were with a small community bank, that was later purchased by a large institution. The large institution would no longer agree to continue to extend the construction loan, and the builder would not agree to a short sale on the numerous properties he owned in the subdivision. My question concerns the strength of our case in trying to obtain a judgement for the earnest money, not the builder's ability to pay if we are granted a judgement. This is particularly important, because we set an execution date (12/2010) in the purchase/sale agreement that was a realistic representation of the timeframe in which we'd be able to secure financing. Closing on the home at this time is not an option, so if possible we would like to pursue options for recouping the earnest money. Thank you for any guidance you can provide on this matter.

 

[KatieKatie]

Hello, I thought I would post an update to this thread, should anyone else find themselves in this situation. I filed a lawsuit against this builder in the Small Claims division of Magistrate Court. The builder's attorney originally responded to my claim with 17 rebuttals, using legal terms that a lay person would not be familiar with, for example "estoppel". I was initially discouraged, but later looked up each rebuttal and decided this was an intimidation tactic as the facts of the case were clear. Following the response by the plaintiff, the court automatically schedules a court date. On the eve of our court appearance, the plaintiff's attorney contacted me and offered to settle for 50% of our claim, $5,000. I rejected this offer and informed him that I was more than prepared to argue the indisputable validity of my claim, before we disconnected. He called back 30 minutes later, and offered to meet me at the courthouse the following morning at 8:00 a.m.(scheduled court date which was at 6:30p.m.), to settle the claim for the full amount in question, $10,000. I met him, we countersigned release forms, and he provided me with a check for the full amount of my claim, and I dismissed my case, as the matter was resolved. This has been a lesson to me and my family about perseverance, and I hope it is helpful to others who find themselves in this situation, or similar situations.