 Dear George: My friend had a verbal agreement to buy a house for the balance on the mortgage plus $5,000. He has been paying the insurance, which states the house was being purchased, and the taxes for two years. He has also been making monthly payments toward the $5,000. The owner has now upped the sales price and sent my friend an effection notice, which to me breaks the verbal contract. Is there anything he can do to make him honor the original agreement?
Answer: Your friend needs to hire a lawyer to prove the oral earnest-money contract. It's unlikely that your friend will prevail, but there is a history in Texas of enforcing oral contracts to prevent fraud. The problem is proof. He will have to convince the judge without any written documents. The only way that real estate can be sold by the rightful owner to a purchaser is by written contract signed by the buyer and seller. There is no such thing as a verbal agreement to sell property in Texas.
Also, there is no such thing as an "effection notice." You may have meant "eviction notice." In that case, such notices are handled through a justice of the peace when a renter has not adequately complied with the terms of his rental agreement.
| Dear George: My daughter entered into a purchase agreement for a condo and gave the REALTOR® $1,000 in earnest money and a $50 option check. During the seven-day period in Paragraph 23, she ordered an inspection, and both seller and buyer agreed to proceed. The appraisal was ordered, and money was paid to the condo management company to fill out a form required by the lender. The closing was set for April 27, 2006. My daughter signed the closing documents, but the seller decided that she would not sell and failed to show up at closing to sign.
After writing a letter and making many phone calls, the title company finally sent us a check in late June for $1,000, not the $1,050 she paid. Someone gave the option check to the defaulted seller. Someone owes my daughter $50. We are being told that the $50 was to be applied to the purchase price. However, there was no purchase because of the seller. Neither the REALTOR® nor the title company will help.
Answer: It is a real estate licensee's duty as a listing broker to deliver the option fee to his client, the seller, within the time frame specified in Paragraph 23. According to your e-mail, the seller defaulted on the Residential Condominium Contract (Resale). Your daughter made written demand for the earnest money and received the $1,000 but not the option fee. The escrow holder did, in fact, return your daughter's earnest money, but he did not return the $50 option fee, because the option fee was not in the escrow account; it went to the seller.
Your question then becomes: If the seller defaults on a purchase contract, what are the seller's legal obligations regarding an option fee that was paid? Paragraph 23, "Termination Option," states in the pertinent part: "If Buyer gives notice of termination within the time prescribed, the Option Fee will not be refunded; however, any earnest money will be refunded to Buyer. The Option Fee will/will not be credited to the Sales Price at closing." In your case, the buyer (your daughter) did not give notice of termination to the seller, and the contract provides that the option fee will be credited to the sales price at closing. At the closing, however, the seller did not show up, thereby breaching the contract.
The seller would owe your daughter the $50 he received had your daughter not sent the written request to the title company demanding it return the earnest money; that action released both parties from the contract. Paragraph 15, "Default," states: "... if Seller fails to comply with this contract for any other reason, Seller will be in default and Buyer may (a) enforce specific performance, seek such other relief as may be provided by law, or both, or (b) terminate this contract and receive the earnest money, thereby releasing both parties from this contract." Had your daughter selected option A rather than option B, she would have had an arguable case for receiving both the earnest money and the option fee.
Had your daughter been represented as a client by a REALTOR®, that REALTOR® would've legally been bound to recommend that your daughter consult an attorney before sending the written communication to the title company.
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