360 View: Steve Miller Sues to Get Out of Buying a House

360 View: Steve Miller Sues to Get Out of Buying a House

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The dispute is based on two clauses in the contract. The deal allows either party to cancel the sale if the buyer cannot obtain a mortgage commitment. However, it also states that “the sale is not contingent upon a satisfactory appraisal.” While the two parties spar, the home is back on the market and being advertised on real estate websites, listed for $7.75 million.

“The entire dispute is because the buyers changed their mind,” said Mitchell R. Schrage, a lawyer representing the Eylers. At one point, Mr. Eyler offered Mr. Miller a personal loan to resolve the financing problem, but Mr. Miller declined, Mr. Schrage said. “They used this as a weapon to try to beat the Eylers down by $1 million,” he said, referring to the sales price. Richard Duvall, a lawyer for the Millers, declined to comment because the litigation is pending.

Even under the best of circumstances, buying or selling a home can be a nail biter. Will the buyers get a mortgage? Will they survive a co-op board interview? What headaches might the home inspection reveal? Somehow, most deals work out.

But sometimes, they don’t. While many sales fall apart for legitimate reasons, as in the case of the co-op board rejecting the buyer’s application, when one party walks away for reasons that seem dubious, the mood can escalate quickly from tense to vitriolic. Cue the lawyers.

“Any crummy apartment these days costs $800,000 or $900,000,” said David A. Kaminsky, a Manhattan real estate lawyer. If a seller or buyer breaks a contract, “You would be ready to murder somebody,” Mr. Kaminsky said. “Suing somebody would be a mild reaction.”

Contracts often include contingencies giving parties an exit, should something go awry. But when a contract is broken under disputed terms, the aggrieved party’s options depend on the language of that deal. In New York, angry sellers often try to hold onto a buyer’s deposit, as the Eylers did. But the buyer might sue for the money back, dragging out the process.

In New Jersey, in rules that seem to favor buyers, a wronged seller cannot keep the deposit, but instead must sue for damages. As for buyers, scorned ones might sue for damages or for “specific performance,” a legal remedy that could force sellers to close.

“As a lawyer, I would sue for everything,” said Steven R. Wagner, a Manhattan real estate lawyer.

Steve Miller, seen here at a show last April, is in a dispute with the owners of a home in Dutchess County, N.Y.

Credit
Chad Batka for The New York Times

But rather than head to court, dueling sides usually end at the negotiating table, since buyers and sellers tend to want to close the deal rather than go to court.

The house needs a new roof? The seller might shave $20,000 off the sales price to cover the cost. The apartment was appraised for less than the selling price? The seller might reduce the price since the buyer can only get a smaller loan, or the buyer might put up more cash since the loan amount would be smaller.

But if one party is unreasonable, the deal can crumble. “It all depends on the parties’ expectations, how much they’re willing to bend,” said Michael Schwartzberg, a real estate lawyer in Bloomfield, N.J.

The risk of a failed deal is often greater in the suburbs, largely because single family homes can have expensive problems that rattle buyers, like old chimneys, leaking roofs and wet basements.

“I think it happens more than we realize,” said Jonathan J. Miller, the president of Miller Samuel Real Estate Appraisers and Consultants. “Speaking as an appraiser, we can be a part of this issue by killing sales when we don’t see support for the contract price.”

When a buyer applies for a mortgage, the bank sends an appraiser to determine the value of the property based on recent comparable sales in the area. Banks generally are willing to lend up to 80 percent of the appraised value. But if the property appraises for less than the sales price, the buyer will face a shortfall, as was the case with Mr. Miller. Mr. Eyler argues in his lawsuit that the appraiser was not familiar with the area, and that the appraisal report was “deeply flawed.”

The number of home sales that have fallen apart has risen over the last two years, according to a report by Trulia. The company’s analysis found that in the fourth quarter of 2016, 4.3 percent of homes listed as pending in the United States went back on the market, up from 1.4 percent in 2014. And in New York City, 2.1 percent of deals fell apart in the fourth quarter of 2016, up from 0.7 percent during the same period in 2014. The report also found that deals on starter homes were more likely to fail than those on more expensive properties, along with deals in markets with tighter inventories.

“In the places where inventory is very tight, that puts pressure on the buyer to put an offer in on something they can’t afford,” said Felipe Chacon, the housing data analyst for Trulia, “and pressure on the seller to be on the lookout for something better.”

Losing out on an apartment is not just a financial setback; it can be an emotional one. Last summer, Mariana Lo and her fiancé, David Burke, 30, were under contract to buy a one-bedroom co-op in Jackson Heights, Queens, for $375,000. Then the sellers’ lawyer told them the deal was off because the sellers needed more time to renovate their new apartment. After that, Ms. Lo, 28, and Mr. Burke heard nothing.

The couple, having relinquished a rent-stabilized apartment, stayed with friends and in short-term rentals, waiting for clarity. The whole time, the sellers still had their deposit. “We were in this weird limbo,” said Ms. Lo, a litigation assistant at Earthjustice. “It was a constant state of anxiety.”

In October, Ms. Lo and Mr. Burke received a letter canceling the contract, along with a check for their $37,500 deposit. The couple rented a one-bedroom in Hamilton Heights, Manhattan, paying a higher rent than before, and called a lawyer who filed a lawsuit to force the sellers to close.

The lawsuit brought the sellers back to the negotiating table. Ms. Lo and Mr. Burke didn’t get the apartment, but the sellers ultimately agreed to pay them $25,000 in damages. A lawyer for the sellers did not respond to a request for comment.

“We were really angry,” Ms. Lo said. “It’s not just an object; it’s your home. We had all these hopes and dreams pinned on this place, and it was just, bam, snatched away.”

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