Real estate law- breach of contract question

[Winnipegopher]

I am in the midst of a real estate dispute and I was wondering if any of the realtors, lawyers or law students had any ideas.

Here is what happened. We entered into an agreement to purchase a house conditional on a home inspection with the conditions to be lifted 6 PM yesterday. We did a home inspection Monday and found a fair bit of work to be done. I e-mailed our realtor yesterday and identified some work to be done and a desired price reduction. He telephoned the realtor and eventually our realtor forwarded, without my permission, the e-mail I sent to our realtor outlining our concerns. The sellers were not happy with our demands and claimed the deal was off. The realtor then put the property back on the market at 3 PM even though we had not made a formal written counter offer.

Around 5:45, we telephoned our realtor and proposed much smaller changes. The sellers verbally agreed to this. Our realtor came by, we signed the lifting of conditions document and toasted our new house. This morning at 9 our realtor received a call from the seller's realtor saying they received and accepted another offer last night. He defended himself by saying we had let the deal lapse as they hadn't signed anything.

I realize that ethically they are wrong (how can they negotiate an offer when they have verbally agreed to another?) but my question is whether I can sue the other realtor for breach of contract for putting the property back on the market three hours early? If they hadn't done that I don't think they would have got a showing and then we would have the house.

Thoughts or advice?

[Sour1729]

I'm a law student so I'll try and help as much as possible, but any lawyers or realtors here feel free to correct me. First I have some questions though. This agreement you entered into, what was it like? Was it simply an agreement to agree? Basically, how binding on them was it?

Also, at what time did they receive and accept the other offer last night? After the conditions had been lifted? Did the people who own the house know that the signing of the lifting of conditions occurred?

Another thing to think about with this is reliance. Did you rely on getting this house in such a way that you performed another action? (Ex. You relied on getting this house so you sold the house you are in now) If so, even if there isn't a contract found that was breached you can probably recover via Promissory Estoppel.

[Winnipegopher]

Sour,

Thank you for your help I will try to answer.


It was a legal contract- a standard offer to purchase used by realtors. It is binding though their argument is I broke the contract by verbally asking for a price reduction. The legislation in place The real Estate Brokers Act stipulates that all contracts or amendments must be in writing.

As far as I know they received the offer about 9 and accepted about midnight. They had our agreed upon deal at 7:30 (slightly altered from the orginal). Their realtor proposed extending the condition time to midnight but they never signed (we did though).

Yes the sellers knew we had signed the lifting of condtions documents with the agreed upon amemdements.

The only thing we can prove reliance is my wife bought a plane ticket to go to Korea. She bought this last Friday after we entered into the deal.

I hope this clears things up. Thansk for the help.

[playhosea!]

Ugh. What a mess. This is really unfortunate and unfair for you.

Let me see if I have this right. You entered into a contingent purchase agreement (which I assume both parties signed, right?) that said "we agree to pay X contingent on what happens with the inspection."

You did the inspection, proposed some changes that they didn't like, then reached an oral agreement on some modified changes (reduced from what you first asked for after the inspection, but still not exactly what's in the original purchase agreement) which they agreed to orally. You signed the new purchase agreement on your end, but they didn't. Then they sold to somebody else. Do I have that right?

I can't give you legal advice because I don't know where you live (Canada? Korea?) and all if this should not be relied upon and is "for entertainment purposes only" okay?

The thing that concerns me about your position is the requirement that the contract be in writing. The original purchase agreement was (I'm assuming) signed by both parties, but the deal you reached orally sounds like you a different deal, where you were probably paying less or getting something else from them. It doesn't surprise me that the purchase agreement form says that agreements/amendments need to be in writing. A foundational contract concept is the "statute of frauds" which requires certain types of contracts to be in writing or they're not enforceable. Contracts for the sale of real estate are one of the major types. (The idea, incidentally, is that some contracts are so important that we can't let people go around claiming that they made oral agreements for them.) If wherever you are has a statute of frauds it almost certainly requires that a contract for the sale of real property must be in writing, signed by both parties, to be enforceable. The new deal that you reached sounds like it was oral and you signed on your end. But they didn't, so it wouldn't satisfy the rule and you do not have a written, enforceable contract.

Sour has been paying attention in contracts class and promissory estoppel the possible end-run around the statute of frauds. Typically that requires (1) a promise from party A that is sufficiently definite for party B to reasonably rely on it, (2) party B does rely on it, and (3) they suffer damages (i.e. incur expenses) relying on it. This is by no means a slam dunk though. Even if your jurisdiction would allow a promissory estoppel claim despite the statute of frauds problem, there is an argument that because the contract says right on it that any amendments have to be in writing, which could make any reliance on the oral agreement not particularly "reasonable" in the court's eyes. Even if you made it over these hurdles, Sour could probably tell you that the remedy for promissory estoppel is typically that you get to collect your reliance damages, not obtain specific performance. What that means is that say you relied on the oral contract and bought a plant specifically to go in the front window. If you sued and won for promissory estoppel, your damages would be the price of the plant -- not a court order making them sell you the house. To get that kind of a remedy you need an enforceable contract.

The other angle you have is a claim against your realtor for some kind of breach of duty to you, which would have been violated by forwarding the email. There would be a lot to look at to determine if you really had a good claim, it's very possible it would be subject to arbitration or other terms that were in the representation agreement you have with him/her, and that's not going to get you the house either.

Sorry if my thoughts (uninformed, unreliable, don't try this at home) sound pessimistic. I may not have all the facts right as stated above. What makes your situation very sad is that you were clearly wronged in a moral sense, but sometimes that doesn't lead to good legal options.

[Winnipegopher]

Playhosea,

You about summed up the situation. For information sake I am in Manitoba.


After the other realtor got my e-mail (from me to MY realtor and forwarded from my realtor to him to explain our concerns), he immediately assumed the deal was off and put the property on the market 3 hours earlier than the contract stipulated. My e-mail to my realtor inidcated terms but in no way was a formal counter-offer. My realtor verbally relayed our demands but the legislation demands all formal negotiations in writing. The e-mail in question is from me to him outlining a strategy and in no way do I give my realtor permission to forward it (It says to summarize our demands). That said I like my realtor and though I do think he screwed up a little bit I have no interest in getting him in trouble.

I guess my only hope is:

If the selling realtor had followed the contract, he would have put it on the market at six pm when the conditions expired. However, we already had a verbal agreement in place by six. Thus if he had followed the contract there would have been no counter-offer and thus we would have the house.

I will make a formal complaint to the real estate board but what I really want is the house at the agreed upon price.

Of course if I get a lawyer involved this gets really messy because somewhere out there, there is another buyer who has happily bought a home and is an innocent party to this mess.

[Schnoodler]

Don't know about canada, but everything must be in writing in minnesota. Most inspection contingencies will specify an amount that both parties are willing to accept to remedy something that comes up in a home inspection. If you request something within that amount, it is still within the scope of the original offer. If you demand something over that you've essentially canceled the original offer and created a counter offer. They are no longer bound to continue the negotiations or even to continue with the original offer. it's the problem with inspections.

To be clear. Once you demanded a remedy above the one stipulated in the original offer you voided the original offer and created a counter offer. The first deal was off, as if it never existed. The only offer available technically was your counter, at their discretion.

Nothing ethically wrong at all, it's the risk you take when you counter an offer. It's why you act quickly, or accept certain defects to facilitate the deal. next time write a better contingency, or be happy you didn't buy a problem. Not to be harsh, but market time is valuable to a seller. It's valuable because by giving it up (contingent home inspection), they fore go an opportunity to recieve another possible better offer. You opened the window for that to happen. Their realtor correctly resumed the selling process once you countered. Unfortunately the very real value of that market time was made apparent in your case. A counter is a risk, most of the time you can get away with it. Just didn't work out in this case for you.

But almost always, it works out for the best. Usually a better property is just around the corner. Good Luck.

[Winnipegopher]

Schnoodler,

I understand your point but you miss one thing. Where is my written counter? My counter was verbal. He put the property back on the market based on rejecting a verbal counter. Nothing signed by either party. No deposit release form filled out. Nothing.

[Schnoodler]

You did say an email was forwarded. And you did say you demanded a price reduction. That's pretty much written proof that you rejected the offer based on the home inspection. I think even the realtor contacting theirs via telephone was enough. At the very least, you officially called the deal off, given the absence of a formal counter. Even if you expressed intent to renegotiate the original.

Most contingencies btw allow for realtors to continue showing the home. So it's really probably immaterial that they put the house back on the market anyway. But that would be based on the contingency addendum and what provisions it stipulates for that. The time frame isn't really to pull the house off the market, it's a time frame for you to complete the home inspection and raise objections so you're not bound to the contract if objections arise. You completed the home inpections and raised objections.

It's a tough deal. Sorry man. Buyers too often think they hold all the cards, and are surprised when they find out they don't. never fun.

[Winnipegopher]

Well in this market buyers hold no cards. Winnipeg is still going crazy.

I don't understand how on one hand we need everything in writing and on the other a deal can be called off upon receipt of a phone call. Doesn't make sense to me.

One thing I am sure of is that an e-mail from me to my agent discussing strategy can constitute a written counter. It doesn't.

[Sour1729]

Schnoodler and playhosea! summed it up pretty well as far as I can tell.

Not sure about Canada but all real estate contracts in the United States have to meet the statute of frauds which means they have to be in writing.

There is this thing in contract law called the "mirror image rule." Essentially, it means that any acceptance that does not exactly mirror the offer is considered a counter-offer. The real estate agent, by forwarding your email to their agent, effectively transferred the counter-offer as far as I can tell.

Things like the statute of frauds are getting tricky these days with all the different issues taking place electronically. I'm not completely sure that the email could be considered "written" to satisfy the statute, but it wouldn't surprise me if it was.

I'm pretty sure there isn't much you can do in this situation, but don't take my advice that seriously because I'm just finishing my first year of law school. playhosea! is absolutely right about promissory estoppel...you wouldn't get specific performance so it wouldn't be worth the hassle to bring that claim to just recover the cost of a plane ticket.

I would try and figure out if Canada has some sort of statute of frauds (written requirement for real estate contracts), and also figure out the rules of acceptance. They could very well be different and change the outcome completely.

[Schnoodler]

No you're right. There was no formal counter. And we are a country away. So read the fine print on the contingency. Maybe it spells out how contingecy's are to be rejected or accepted. Maybe you can enforce the original contract based on those rules. It should be right there. And if it's not, an email is pretty clear proof, regardless of how you intended for it to work out in the end.

I know buyers are all goofy these days, but 'strategy'?? The deal was done. so what are you strategizing about. Either the contract was acceptable or it wasn't. I mean take a step back and look at this. You either had a legitimate concern that merited a counter, in which case the house was not worth the contracted value, and so you were opting out based on that, or you were taking advantage of your percieved bargaining power and trying to apply the thumb screws. If you had legitimate concerns, then you should feel lucky you caught it and move on, because the house wasn't worth what you were originally willing to pay for it. If you're just trying to take advantage of these folks that's very bad form in residential real estate if you ask me and you pretty much got what you deserved. that is if you really want the property. Don't piss of the sellers and nickle and dime your way out of a property you want. Pay what it's worth, get the home inspection to make sure it's not a money pit, and celebrate finding the right house. This is exactly why when I was in real estate i counceled my buyers against these kind of games. It's too hard to find a good property to lose it over something that wouldn't have been a deal breaker. I mean really, if you weren't in a competive offer situation you probably already got it a few thou under anyway, don't *&^!#*&^!#*&^!#*&^!# that up trying to squeeze normal folk. They often react out of principle and get offended easily. Just not worth it. Once you've been searching a while you know how it compares to other homes. If the price is right, the goal is to secure it so it becomes your own. Save the crap for the car dealerships, they like playing games. Sometimes despite my input buyers would try to do something like this and lose a home. They were always more agressive with the next home, I'd often have to convince them to lower their offer they were so mortified at losing the second. But also, without exception the house they ended up with was a better fit. almost like magic. So have faith that it'll all work out for the best. I think you'll find it does.

I'm on your side, not trying to be harsh. But you're buying a better lifestyle not a house. If you find the right one, buy it aggressively in a responsible manner. Get the right price up front and close the deal. And for heavens sake write a decent amount of money into the inspection so that you don't lose it on little stuff.

[Winnipegopher]

Schnoodler,

Thanks for the advice. I understand your point of view. Strategy was not the right word. The house came out of the home inspection needing alot more work than we had thought. We over-reacted and had not fully thought out our actions. We regret that now- obviously. However, that does minimize that the realtor acted rashly and against the rules of the Real Estate Board (he has admitted this verbally). He also acted unethically (in my view) by verbally agreeing to a deal and then entering negotiations with another party without giving us any notice. Not telling us that what he has called a "done deal" has fallen apart until the next morning is inexcusable. We even drank a bottle of wine we had been saving for this.

I realize I have little recourse. That said I will make a complaint with the Real Estate Board and I will spend the next few years telling whomever I meet what a weasel the realtor is.

PS In no way is an imporoperly forwarded e-mail evidence of anything.

[jamiche]

It sounds like the whole thing was handled in a rushed, clumsy fashion by all parties. If you are a buyer in a sellers' market your leverage is limited. I completely agree with whoever said earlier that you will learn from this experience and end up in a better house. FWIW, I wouldn't file a complaint against your realtor. It sounds like he was trying to expedite matters for you because the parties were up against a deadline. Forwarding the email without your permission was, in retrospect, a mistake but I don't think it was a violation of his fiduciary obligation to you.

[jamiche]

Disregard my earlier statement on filing a complaint. I thought you were going to file against your agent. The seller's agent probably has no fiduciary obligation to you and he has little control over his client's actions.

[Winnipegopher]

Jamiche,

You are probably right about it being poorly handled by all. I like my realtor and think he is very good at his job and would not think of filing a complaint against him. I will file one against the other realtor though. I think he acted dishonestly and unprofessionally by negotiating with another party (without informing us) after we had agreed to a deal. Would it have been so diffcult to call our agent and say, "we just got another offer- our deal is off until we review it."

Too many realtors act like used card dealers and that is why they get treated as such. It is a hard profession to respect and they bring it on themselves.

[jamiche]

He probably should have called your agent but he may have been told not to by his client.

Like in any business, there are always a few rotten or lazy agents but I have found the overwhelming majority of residential and commercial brokers with whom I come in contact to be knowledgeable, careful in their statements and diligent. The best agents, when representing a seller, ask the tough questions of the seller up front. If a property has warts, and they all do, it's best to know the "issues" up front and then disclose to any serious, qualified buyer. Any buyer with a room temp IQ is going to do a thorough inspection and find the problems. It always works out better to factor them in up front. Doesn't always happen, though.

[Gopher4Life]

Take it to Judge Judy. She'll have you settled and on your way in 15 minutes.