House #3: To Walk or Not To Walk Away?

If you read about our House #3 experience, you know this house provided us with a wealth of learning opportunities; however, we had reached our limit with the sellers.  We wanted out of the sales contract.  

We contacted our Realtor to let her know we wanted to walk away from the deal.  Our closing date was behind us.  We had become renters and we wanted to be home owners.  The property was tied up in a legal mess due to engineering liens and there still was the issue of the pending plot approval by the county.  With the situation as it was, the house did not qualify for financing because it wasn’t complete and the owners/sellers didn’t seem to be in a hurry to complete the house. Why should they?  We were paying them rent which created positive cash flow for them.  The longer we paid them rent, the more money they made on the house deal which meant the more the house was costing us.  We asked our Realtor to give them 30 days notice that we were vacating the property based on a standard month to month rental agreement.

When the sellers were notified of our decision, they refused to release our earnest money back to us saying we failed to perform.  They said they were willing to sell the house to us and that we were breaking our sales contract.  We said they failed to perform.  We were willing to buy, but the sellers couldn’t provide us with the title to the property by our closing date, plus the house wouldn’t finance in it’s current condition and we allowed the sellers plenty of time to get the house ready to close.  The house was to be purchased with a VA loan. VA requires that the house qualify for financing or the vet is supposed to get their earnest money back. We moved into House #4 the end of May, 1993 (we closed the previous house on June 1, 1993).  We were supposed to close on House #4 in July.  It was now September.  

Regretfully we started packing and looking for House #4.  Now technically we never owned House #3, but due to the extent of our experience, I count it as one of our homes.  After all, we completed a lot of work on this house that the sellers would benefit from after we moved out.  We left a lot of our sweat equity in that house.  We removed from the house what ever we could, making sure we didn’t damage the property.  We left behind several things, including all the mini blinds and a medicine cabinet in the master bath that we paid for and installed.  Jon disassembled the unattached storage shed he built.  We took down the play structure Jon built in the back yard.  We vacated the property by October 28, 1993 and it was in better shape than when we moved in.  It should be noted that the house was still incomplete by our move out date.

The release of our earnest money decision was handed over to Small Claims Court by the Escrow Company because we disagreed on who should get the earnest money.  

When we appeared before the judge, the owner was very angry.  She told the judge we left the house in poor condition and she deserved the earnest money because we damaged the home and we didn’t buy the house.  We said we didn’t buy the house because it was not complete and the sellers could not close on the house as promised due to the still pending plot review with the county; our closing date was long over due. The judge told the seller that if she believed we damaged the home, she should have filed that evidence with the courts prior to our court date.  Since she did not do that, she was not allowed to go after us for damages related to this property now or in the future.  The judge told us next time we buy property we should put a termination date on our sales contract. 

The judge ruled in our favor, we got our earnest money back.  The seller stormed out of the court room.

The sellers re-rented the house after we moved out and eventually sold it in July, 1994 for a little more than what we offered to buy it for.

Side note:  This house sold for $219,900 in 2006.


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