Jim
http://www.jimsweetwater.com

I thank you for your comment, and perhaps I was not clear enough in my presentation of the facts, so I shall clarify. the standard purchase contract typically includes various conditions and/or contingencies which must be met for the contract to proceed. These may include the requirement that you make a good faith effort to obtain necessary financing or to sell your own property; or that the seller make certain repairs and provide good title. In pre-construction contracts, these conditions can be the delivery date or promise of certain amenities. If the seller does not meet these requirements, a buyer may be entitled to an earnest money refund.

On the other hand, if the buyer breaches the contract, that buyer may forfeit their full earnest money deposit. The seller injured by the breach may also seek additional damages or try to enforce the contract by asking for “specific performance” (something that has never been upheld in the State of TN to my knowledge) where a court is asked to compel the breaching party to perform their promise-to purchase. Disclaimer: If your purchase contract does not close, you should consult your attorney over the remedies that may be available and that is exactly what is happening here.

Also Alyse, you sound like a smart broker, don’t you advise your sellers to only accept an earnest money amount high enough to cover your sellers potential losses in the case the buyer does not perform? I am sure that you have had deals fall through in the past, and yet, I don’t think that you’ve ever helped your sellers sue a buyer for damages in a TN court of law. I can only assume that it’s because you advised your sellers correctly and only had them except offers with adequate amounts of earnest money.

In most of the buyer initiated litigation the contention is that the seller either 1) never consummated the contract by not delivering the condo by the specified date or 2) the more philosophical argument over the existence of a true financing contingency. The latter argument offers this interesting thought: If the developer was willing to accept a 14 day financing contingency more than 2 years prior to the actual delivery of the project, how did the developer in good faith expect the buyer to provide such an item when no product existed on which to appraise or make formal application? In this case, no formal financing letter could even be produced. Also under this theory, the mere existence of the financing contingency lends to the developer’s understanding that buyers are going obtain traditional financing from and bank or lender in order to secure funds for purchase. It is with this understanding that the buyer and developer both chose to move forward with the contract and now the buyer cannot obtain financing through no fault of their own.

But honestly, let’s put all of this aside for a moment and look at the entire situation. We currently live in a economic recession. Most of these buyers offered to try to work with the Bristol Development Group in good faith prior to not closing on their contracts (at least the buyers I have spoken with have done so). The West End project was completed more than a year ago and most of these contracts were resold to new buyers at that time. Why did the developer wait almost a year to file for damages? Why sue now just before they open a brand new building?