real estate law advice needed
Question: I have recently signed an offer and acceptance contract to buy a house. After signing the contract I had an inspection done and discovered that the house had significant settling (I was unaware of settling before this inspection). The inspector said there is no present damage to the structure and the settling is not uncommon. I had a friend (a structural engineer) look at the house and he said the structure is fine now but in 5 years it may settle more and cause problems. I contacted the seller and gave him my list of repairs, which included the repairs for settling and I requested a 5yr warranty on settling repairs. The contract includes a clause to allow me an inspection and the seller agreed to a max $ amount he is willing to spend on repairs, refusal to carry out these repairs gives the buyer the right to cancel the contract. The seller disagreed to my assessment and hired his own structural engineer, whose report also found the settling but stated that the house is structurally safe and recommended minor repairs. Seller agreed to carry out these repairs, but, 1. The seller never gave me a disclosure, I think he was also unaware of the settling. In my request I asked for a 5 yrs warranty against further settling, which no one is willing to provide, and the seller thinks it is unfair to ask. He is hung on the word repairs and insists that since no party has termed the house damaged or unsafe he is not bound to perform anything beyond minor fixation. He calls everything beyond minor touchups as home improvement and not rpairs. My argument is, settling compromises the value of the house and I had made him an offer assuming there was nothing wrong with the house. If I had known what I know now about the house I would have never made hime an offer. Can I cancel the contract based on this new discovery. 2. Although it was our understanding that the contract we signed was a sale and purchase contract but later on I discovered that the title of the contract said “offer and acceptance”. Does that give me any leverage in terms of cancelling the contract. Although the contract does not say a sale and purchase contract will be signed later. Also what is the legal standing of a offer and acceptance contract as opposed to a sale and purchase contract. 3. The seller is holding my earnest money which I would like to get back. What is the maximum risk I have if I decide to walk out on the contract under my arguments. 4. How about if I keep the seller engaged in negotiations and the closing date passes by. I am just trying to find a way out of this contract without loosing my earnest money or any other legal repercussions.
Need I say the house was FSBO and there were no attorneys involved. If it helps the house is in Arkansas. Any help on this matter is greately appreciated.
Answer: Now that you have added the above facts to the story, things become a bit clearer.
First, the issue of what is a “repair” and what is a “home improvement” is a gray area. If this case were to go to court, the judge would decide which items are repairs and which are home improvements. On the face of it, my guess is that it would all be deemed repairs, but you never know. The problem is that the terms “repairs” and “home improvements” do not appear in Black’s Law Dictionary and, even if they did, the definitions in Black’s are specific to the jurisdictions which Black’s cites for the meaning. The way lawyers generally get around these issues is to define the terms within the contract. In your case, that was not done, presumably because it never occurred to anyone that the seller would come up with “home improvements.”
As for your second issue, the answer is clearly no, you cannot get out of the contract by engaging the seller in discourse past the closing date. The reason is the legal principle of waiver. By continuing to discuss these issues with the seller you are demonstrating waiver of the time is of the essence clause (another clause in all standard earnest money/purchase agreement forms, and a clause which does not mean what it sounds like it means). Therefore, continuing to carry on negotiations means the seller has a reasonable time to perform once the further negotiations are concluded, in spite of the deadline in the contract.
You could, however, get around the waiver issue by telling the seller in writing that you are willing to continue to negotiate but that such negotiation should not be taken as waiver of the time is of the essence clause.
In a case like this you might want to consider instead asking the seller to agree to abide by an informal arbitration. Each of you appoints someone to represent you (perhaps your individual real estate agents) and they decide the case. No muss, no fuss, no lawsuits, no expense, and everyone goes home reasonably happy. Otherwise the danger is that the only winners will be the attorneys. You might also check for an arbitation clause in your contract — many contain clauses requiring arbitration these days.
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