Buyer's remorse: buyer breaches real estate contract
June 14, 2016 11:06 PM Subscribe
What are the consequences for breaching a real estate contract on the buyer's side?
If a buyer has taken a bank loan and has realized that paying the mortgage on the new house is not feasible because of living costs, what steps can the buyer take to leave the contract? How likely is it that the buyer will be sued? The $1,000 deposit has been paid to the realtors and contract has been signed. The house will close in a month and a half.
This is the buyer's second house. They have paid off the mortgage for their first house but have taken out an equity.
If a buyer has taken a bank loan and has realized that paying the mortgage on the new house is not feasible because of living costs, what steps can the buyer take to leave the contract? How likely is it that the buyer will be sued? The $1,000 deposit has been paid to the realtors and contract has been signed. The house will close in a month and a half.
This is the buyer's second house. They have paid off the mortgage for their first house but have taken out an equity.
Has the place been inspected? Based on my experience in Illinois, a buyer can get out of a contract for trivial reasons that come up during an inspection.
posted by she's not there at 1:07 AM on June 15, 2016 [1 favorite]
posted by she's not there at 1:07 AM on June 15, 2016 [1 favorite]
This is too state-specific and contract-specific for anyone to advise you effectively here. If the buyer can't afford the house long-term, the cost of retaining a lawyer will be small in comparison.
Additional advice: whatever you/the buyer think you're doing, taking out a line of equity on a paid-off house to help pay for a second house you not only can't afford, but didn't realize you couldn't afford until after signing a contract, stop it. Just stop it. You are trifling with some hard-won financial security.
posted by praemunire at 1:13 AM on June 15, 2016 [3 favorites]
Additional advice: whatever you/the buyer think you're doing, taking out a line of equity on a paid-off house to help pay for a second house you not only can't afford, but didn't realize you couldn't afford until after signing a contract, stop it. Just stop it. You are trifling with some hard-won financial security.
posted by praemunire at 1:13 AM on June 15, 2016 [3 favorites]
In most jurisdictions, the possible consequences are (1) loss of the earnest money deposit, (2) damages for other actual costs incurred, and (3) the difference, if any, between what the buyer agreed to pay and what the buyer who comes through in fact pays for the property.
Which are likely? A realtor and a lawyer may have some ideas, but in truth item (3), the largest potential one, is entirely unknown. Could be 0, could be tens of thousands.
posted by megatherium at 4:22 AM on June 15, 2016 [1 favorite]
Which are likely? A realtor and a lawyer may have some ideas, but in truth item (3), the largest potential one, is entirely unknown. Could be 0, could be tens of thousands.
posted by megatherium at 4:22 AM on June 15, 2016 [1 favorite]
Nthing that this is a contract-specific thing. When a prospective buyer signs a contract, the consequences are spelled out there. It varies from contract to contract, so there's no blanket response we can give you.
posted by jdroth at 6:10 AM on June 15, 2016
posted by jdroth at 6:10 AM on June 15, 2016
My sense is that generally, home purchase contracts are easier to get out of if you're the buyer than if you're the seller. But as everyone else has said here, it depends on the specific contract at issue.
posted by craven_morhead at 8:15 AM on June 15, 2016
posted by craven_morhead at 8:15 AM on June 15, 2016
IANAL. This is not legal advice.
As others said, if you haven't had an inspection yet, you can basically have an inspection. There will be *something* wrong. You can use that to get out of the contract.
If you really don't want to buy the house, you can also talk to your lender about it. I don't know how ethical this is, but it's fairly easy for the lender to say that you don't qualify anymore, since they will repull your credit and verify your information again closer to closing. (Or you can fail to produce some important document, such as a paystub. But then you're probably screwing up your relationship with the lender.) Obviously, you'd have to work with the lender on this one.
posted by ethidda at 3:46 PM on June 15, 2016
As others said, if you haven't had an inspection yet, you can basically have an inspection. There will be *something* wrong. You can use that to get out of the contract.
If you really don't want to buy the house, you can also talk to your lender about it. I don't know how ethical this is, but it's fairly easy for the lender to say that you don't qualify anymore, since they will repull your credit and verify your information again closer to closing. (Or you can fail to produce some important document, such as a paystub. But then you're probably screwing up your relationship with the lender.) Obviously, you'd have to work with the lender on this one.
posted by ethidda at 3:46 PM on June 15, 2016
As others said, if you haven't had an inspection yet, you can basically have an inspection. There will be *something* wrong. You can use that to get out of the contract.
This is definitely jurisdiction specific. Where I live you have to have the inspection done during the cooling off period (5 working days). If you drag your heels or don't do one at all; sucks to be you.
posted by kitten magic at 4:00 PM on June 15, 2016
This is definitely jurisdiction specific. Where I live you have to have the inspection done during the cooling off period (5 working days). If you drag your heels or don't do one at all; sucks to be you.
posted by kitten magic at 4:00 PM on June 15, 2016
I'm no lawyer, but I recently bought a house (in Michigan). Here, at least, the Purchase Agreement (which is the initial contract drawn up; they can be modified later with both parties' consent) usually spells out the contingencies (the conditions under which the buyer can back out). Inspections are the most standard reasons (basically, you have N days to get an inspector over after the contract is first signed, and then M days to back out for inspection-related reasons). Backing out for anything not covered in the contract language means (very) probably sacrificing the Earnest Money Deposit, typically 1%-2% of the sale price of the house, which is kept in escrow from the time when the offer is made.
posted by axiom at 5:26 PM on June 15, 2016
posted by axiom at 5:26 PM on June 15, 2016
This thread is closed to new comments.
No one here can answer this for you, because it depends in large part on what consequences are specifically spelled out in the contract, which we do not have. For starters, you will likely forfeit any earnest money/deposit you put down. For legal concerns beyond that, you need to refer to the contract and bring it to a lawyer who can help you understand it better.
posted by charmedimsure at 11:44 PM on June 14, 2016 [3 favorites]