My sister and her husband were looking for a house near my house so that I could help with their newborn baby while they work. We were fortunate to find a house that was up for sale or available to rent. The owner said that he would allow them to purchase the home through him using an owner financing agreement. This made me a little nervous because I had read a few stories about people getting ripped off using this method of home buying. That is why I paid for my sister to have a real estate attorney to work with. Visit our blog to learn what to look for in owner financing agreements to protect yourself from loss.
When you make an offer on a home, one of the thoughts that likely never crosses your mind is that you might want to back out of the purchase at some point. However, it happens. Regardless of the reason for your need to pull out of the agreement, you need to handle the situation carefully. Your earnest money is on the line, and in certain situations, the seller is entitled to keep it. Here are some ways you can back out of the agreement.
Use a Contingency
Your real estate attorney likely included several contingencies in your purchase agreement. Contingencies give you and the seller the freedom to back out of the agreement if certain conditions are not met by the other party. For instance, if the home failed inspection or you were unable to secure financing, a contingency would allow you to end the agreement without losing your earnest money.
If you are unsure there is a contingency that fits your particular situation, talk to your real estate agent. He or she can review the agreement with you and determine if you can rely on a contingency to end the deal. If so, your attorney can notify the seller or realtor involved of your decision.
Negotiate With the Seller
In the event that there are no contingencies that can protect you, negotiations with the seller might be possible. Depending on the seller, you could possibly work out an agreement to allow you to back out of the original arrangement and still receive some or all of your earnest money back.
It is important to note that the seller is not under any obligation to negotiate with you. If you do not have a legal reason for backing out of the purchase, he or she can choose to keep the earnest money and place the home on the market again. Therefore, you need to work with your attorney to find the best argument for why your deposit should be returned.
Breach the Contract
Unfortunately, it is not always possible to convince the seller to end the contract and refund the earnest money. If the seller has refused your request, you can still walk away, but it will be seen as a breach of contract.
The seller can choose to take legal action against you for this act, but a lawsuit can be time consuming and expensive. He or she will likely take the earnest money and walk away from the contract.
For more information about getting back your earnest money if you need to back out of an offer on a home, talk to real estate attorneys like Steve Butcher Sr.