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Real Estate Q&A: Be Wary of Keeping Would-Be Buyer’s Deposit

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By Gary M. Singer

(MCT)—QUESTION: I am selling my vacant house “as is,” and the buyer never had an inspection done. At the walk-through yesterday, he could not get the air conditioner to work. Now he insists that I give him a credit to get the A/C replaced, or he will cancel the contract. Can he do this?

—Art

ANSWER: Not unless you let him. Typically, in an as-is deal, the buyer will get a short period of time to get inspections done and to do his due diligence on the property. During this inspection period, if the buyer is not happy with the house, he can cancel the contract and receive his deposit back. After this period ends, the contract “goes hard,” meaning that the buyer will lose his earnest money deposit if he does not close.

In your case, it sounds as if the buyer has missed his chance to cancel the contract and still get his deposit back. If he does not close, you can keep his deposit. But before you do this, think about the potential consequences. You should consider how much the deposit is, how much the A/C repair will cost and how long it will take to find another buyer. Does it make sense to let this deal fall through? You may find that you would be better off reaching a compromise than waiting two or three months to find a new buyer, especially if the deposit is only $1,000 or so and the repair cost isn’t astronomical.

Q: I am curious about purchasing property at foreclosure sale. It seems too good to be true that you can get a house for just a few thousand dollars this way. Is it?

—Kathy

A: Yes, it is often too good to be true. When you purchase a home from a foreclosure auction you get the title to the home subject to any issues that may be attached to the house, and you also get the house in the physical condition that it is in. This means that you will have to clean up the house and deal with any code enforcement issues with the city. You will also have to make sure that all back due homeowner’s association dues are brought current. But that is not the worst of it. When a lien is foreclosed, it can only foreclose out other liens that are subordinate to it.

For example, if the lender is foreclosing its second mortgage, the first mortgage will still be a valid lien against the property. Further, if the lender misses or otherwise does not sue another lien holder, that lien will also still be against the property.

All of this means that when you purchase a property at a foreclosure auction for a very low price, it is probably that way for a reason. It is very important that you thoroughly research any property so that you don’t end up buying a problem.

Gary M. Singer is a Florida attorney and board-certified as an expert in real estate law by the Florida Bar.

©2012 Sun Sentinel (Fort Lauderdale, Fla.)
Distributed by MCT Information Services

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