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Ely, Counselor at Law
Category: Real Estate Law
Satisfied Customers: 99476
Experience:  Qualified attorney in private practice including business, family, criminal, and real estate issues.
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We are selling our home in Almaden Valley, San, CA. After 6

Customer Question

We are selling our home in Almaden Valley, San Jose, CA. After 6 days on the market, we received a good offer and decided to accept it. The original contingencies were 5 days for inspections and 10 days for financing. We had inspected the home beforehand and no problems were found. The buyers had another general inspection done by the same inspector 4 days after we went into contract. They asked the inspector about a crack in the foundation and he said they needed to ask a Structural Engineer instead. So, they hired one that performed an inspection on day 9. This inspector found "major foundation repairs needed" due to rusting rebar (by the way, his company does such repairs.) Now, on day 11, the buyers have announced they are backing out of the deal. No extensions were ever signed and no other paperwork has gone through yet for them to terminate the deal. We have offered to pay for the foundation repair ($10K-$15K) but haven't heard back from them. Do we have any recourse since they were past the contingency deadline? Does the contingency period automatically disappear after day 5 and no extension paperwork was filed?
Submitted: 3 months ago.
Category: Real Estate Law
Expert:  Ely replied 3 months ago.

Hello and welcome to JustAnswer. Please note: This is general information for educational purposes only and is not legal advice. No specific course of action is proposed herein, and no attorney-client relationship or privilege is formed by speaking to an expert on this site. By continuing, you confirm that you understand and agree to these terms.

I am sorry to hear about this situation. This completely depends on the contract. There is no statute that deals with this issue in California as this is a purely contractual matter. As such, common law doctrine of contract law applies.

As I said, it all depends on the contract. If the contract allows them to terminate based on inspection (at any time, even past the deadline), then they can. If there is no clause, then they cannot. If they cannot, the contract controls whether the seller can (a) keep earnest money, (b) force a breach of contract sale and demand specific performance, (c) or have their choice of the two.

But - even if the contract does not specifically allow them to terminate based on inspection and they are past the deadline, they can attempt to claim that you attempted to hide the problem, in essence, fraud. Their claim of fraud can be an "affirmative defense" to your breach of contract claim (or keeping of the earnest money). If this happens, then the Court decides as to what is to happen, on a case by case basis, given the facts.

So someone in your situation now wants to send a letter threatening breach of contract suit and/or keeping the earnest money. Hopefully, this would scare them enough to decide to buy to avoid litigation and/or loss of earnest money. If they do not "blink" and demand the money back, and you disagree, then this may indeed be settled by the Court one way or another.

Good luck.

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