We all dream of owning a beautiful house by the ocean in Southern California. In this dream to nightmare tale, a California company that I represented, which regularly purchased properties out of foreclosure, bought a large beach house in Southern California. My clients then evicted a holdover tenant, repairing the extensive damage he had caused. They used a licensed contractor who also repaired other parts of the house to make it sell. So far, so good.The house sat on the market for a year with no buyer even though it was a beautiful property and priced right. My client was selling the home “as is” and made full disclosure in writing about what they had done to the property after they bought it. Because the house was purchased through auction, they had no knowledge about the history of the house.
In September of 2011, two young medical doctors who were first time home buyers, made an offer to purchase the house, as is, for $1,325,000 and their offer was accepted. The buyers hired a professional home inspection company which inspected the house and stated in their report that there were water intrusion problems. Even so, the buyers chose to buy the house.
A few months after escrow closed, the rains came and the house leaked. Even though they were not legally obligated to do so, the seller sent his contractor back to repair the damage from the rains. The new home owners were dissatisfied with the sale and the repairs so, as required by the Real Estate Purchase contract, all the parties went to mediation.
The buyers offered to settle their claims against my client for about $350,000, but on my advice, my clients refused the offer. The buyers then sued my client for fraud, negligence and many other claims, all of which were bogus.
Over the next two years, I represented not only the sellers but some of the brokers. After over $100,000 in legal fees were incurred, the case settled for a mere $15,000, primarily because the sellers never showed proof of their $350,000 in water intrusion damages — despite numerous requests for such proof.
Another reason why the buyers lost their case was because the two different attorneys representing them regularly communicated contradictory messages to me, so I determined they had no client control to move their client to a reasonable settlement.
Additionally, the brokers involved in this matter represented both the buyers and the sellers. Accordingly, when problems developed, the brokers sued each other which complicated getting the case settled.
While it may have cost my client over $100,000 in legal fees to settle for $15,000, they saved over $200,000 by not settling for $350,000 at the mediation. I recognized from the outset that the buyers’ were attempting a “money grab” to see if they could get that amount without actual evidence or proof of damages.
The moral of this nightmare on the beautiful beach is the following:
- Never assume anyone is or will be reasonable.
- Never assume that plaintiffs with lawyers on a contingency basis will not spend the same time and money on a loser lawsuit.
- Never assume plaintiffs’ lawyers can and will control their clients.
- Never assume that anyone will tell the truth.
- Never assume logic or the law will win out.
- Dual brokers spell disaster.
Attorney Laurie Butler is the principal of The Butler Law Firm, which provides expertise in business and real estate litigation, arbitration and mediation, as well as a full spectrum of legal services for individuals, LLCs, corporations, partnerships and small to medium – sized business. Over the years, Laurie Butler has won cases for her clients in the entertainment industry, fashion, internet disputes, real estate and construction, art and creative services, professional services, and residential real estate, to name a few.