Question: If a home is offered for $300,000 and certain terms, must the seller accept the first buyer who meets such standards?

Answer: No. A home may be announced for sale but the seller is not obligated to accept an offer. As an example, a home is made available at $300,000 and there are offers of $300,000 and $310,000. The seller can plainly pick the higher offer.

There are, however, some issues to consider. For instance, is the home listed for sale with a broker? If yes, has a "ready, willing and able" buyer been found who met the terms of the listing agreement? If such a purchaser has been found and the owner refuses to sell to anyone, then is a brokerage commission owed? The broker, after all, did find a buyer according to the requirements of the listing contract.

Question: We sold our house or we thought we did. Last day the buyer backed out and now says we were the cause. What do we do? Also we had a house that we where going to buy with profits from the sale of the first home but now there will be a sale.

Answer: Real estate contracts routinely have "contingencies" -- "I'll buy your house if it passes a home inspection" or "I'll buy the house if the owners will make certain repairs?" Were there requirements in the sale agreement you needed to complete by closing? Typically such information is known well before the date of settlement.

Or, did the buyer fail to fulfill all obligations under the sale agreement?

As to the second home, does your purchase agreement make it contingent on the sale AND settlement of the first home?

Two thoughts: First, you have one and possibly two disputes -- one with your buyer and one to emerge shortly with your seller. Please get an attorney immediately. Second, in the case of the first home, if the problem is work not completed ask if you can create an "escrow" (trust) fund to complete any required repairs or other work.

Question: We contracted to buy a home on the 1st of the month. Closing is in 45 days. Ten days prior to closing there was a huge storm which took down a large tree in the backyard and damaged the house. Is the seller obligated to fix the house and replace the tree?

Answer: At the time you bought the property, the day the contract was signed, you purchased a home with a given physical condition -- not perfect, but as you saw it. The seller has an obligation to deliver the property in substantially the same condition as it was on the contract date.

In the situation you describe it's likely that the owner's insurance will cover some or all of the bill. If the repairs are not completed by closing, then establish an "escrow" or trust account at from the seller's funds at closing to assure that the work is completed.

As to the tree, it was going to fall at some point. The storm was plainly an act of nature. The owner is obligated to clean up. If you're on good terms with the seller, maybe ask for firewood.

Question: I want to purchase an investment property and let a relative stay there rent-free for two years. When I sell will I have to pay capital gains?

Answer:The property is not your prime residence and it's not a second home. It is an investment. If there is a profit when you sell then will have to pay the capital gains tax.

There is also the matter of that rent-free tenant. An investment property is supposed to generate income. Your property does not. What is rent forgone for tax purposes? Have you made a gift to your relative? Is it necessary to pay a gift tax? Please speak with a tax professional for specifics.

Question: What is the right amount for the deposit that goes with a purchase offer?

Answer: Traditionally the answer is that if you're the seller you want as much as possible so that if the buyer backs out of the transaction you will have as much protection as possible. If you're a buyer, you want to put down as little as possible, maybe just a bag of lemon drops.

In practice there is no "standard" deposit amount or percentage. It's all negotiable.

This column is designed to provide accurate and authoritative information in regard to the subject matter covered. It is made available with the understanding that neither the author nor the publisher is engaged in rendering legal, accounting, or other professional services. If legal services or other expert assistance is required, the services of a competent professional person should be sought.

Published: July 11, 2003

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