Monday, October 19, 2009

Our House Purchase Fell Through

Well, we have terminated our house purchase contract. This is very disappointing, but it was the right thing to do. How did we get to this point? It all boils down to one thing: the seller did not disclose to us that at the time we signed the contract he had a firm lease with a tenant. While at some point the tenants supposedly expressed a willingness to move out, there was never a firm commitment with a firm date.

The sellers and their agent are clearly the bad guys in this story. The tenants did nothing wrong - they were supposedly willing to cooperate, but understandably were not willing to give up the house before they found a different place to rent. Can you blame them? I can't. The idiot sellers actually threatened to initiate eviction procedures against the tenants - which they clearly had no cause to pursue. That's when I started having serious second thoughts about buying the house. If the sellers were unethical enough to try to evict an honest tenant without cause, could I trust their word on anything else? For example, could I trust them that they made repairs and improvements to the house which my inspectors could not see for themselves (e.g. roof repairs, pipe replacement etc.)

I believe that we may have been able to close the deal if we had chosen to aggressively pursue it. However, going for closing would have carried serious risk for us, as well as immediate costs. For one thing, I would have had to liquidate part of our investment portfolio, thereby immediately incurring a capital gains tax liability, whether or not the deal went through. In addition, we would have had to give notice to our own landlord and may have lost our own house. Finally, the tenants' supposed proposal to move out was conditional on their finding a different place. If they did not find a place, the deal would not go through and my mortgage financing would lapse. The risks in going to closing were just too high.

What next? We've decided not to try to sue the sellers. According to legal advice we got, our only way to sue them would be to demand closing, and to do so, we would have had to transfer all our cash to the escrow account. As I mentioned above, this would carry immediate costs, and would lock-up most of our net worth in an account we could not control, for a length of time that was not immediately clear. As much as it pains me, the ******* sellers and their lying agent will get out of this without the punishment they so clearly deserve.

Could we have avoided this result? I have been asking myself this question for the past week. My honest answer is that I can't think of anything we could have done differently. Occasionally in life you run across unethical characters. It's just the way things are. I just wish I could make sure that they received the punishment they deserve.

As a final note, we have had a major rain storm in California last week, and in one of the final e-mails sent to us by the sellers' agent, he wrote (god knows why) that the tenants complained that the roof was leaking. The sellers told us they replaced the roof. I guess they didn't do a very credible job on that either.

It's back to square one. We're in the market for a house. :-(

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asgreen said...

It sounds like it was a blessing that you ended up terminating the deal. Good luck with your continued house hunting!

Shadox said...

May sound like a blessing but it doesn't feel like one right now.

Thanks for the good wishes!

Keith said...

just wanted to let you know that from an outsider, it sure sounds like you did the right thing. Best wishes on the house hunt!

guinness416 said...

That's a real shame. Nothing's ever straightforward is it? FWIW I agree with Keith in that from a dispassionate viewpoint it seems like it's for the best. Best to try not to dwell on it more than necessary. You'll find a better, or at least totally comparable, house.

Kim Stiens said...

Sadness! There must be some place online that you could at least leave a bad review for the seller and his agent? I assume the agent must be part of some professional cooperative or be licensed in some way that might allow recourse...

I hope you find a lovely new home soon!

Shadox said...

Thank you all for your kind words. I'm sure we'll get a nicer, better house.

In a way, the person I am most sorry for in this whole sorry engagement is our agent, who did all the work and did not get paid at the end of the day... :-(

We sent her a nice gift basket, but that's small consolation, I guess.

frugal zeitgeist said...

I think you did the right thing. Kudos to you and Alpaca for your strength.