Source
r/personalfinance•
NotKennethBone

Backing out of home purchase?

Housing

This is not my situation but I had the question posed to me. Suppose one is under contract for a home purchase and put up an earnest money deposit. Very concerned about jobs, economic fallout etc related to Coronavirus. Is it possible to back out of the contract? I assume the earnest money would be lost. Any potential legal repercussions or other issues?

Not looking for reasons to go through with the purchase or not, just the mechanics of backing out of a house under contract.

Posted Mar 19, 2020, 3:24 AM UTC

14
Werewolfdad​•

Depends on whether the sales contract limits liquidated damages to the earnest money.

If not, you could get sued for any actual damages.

1
10001maniacs​•

Well this happened to me TODAY. It sucks and the buyer was given their Ernest money back. Much to my displeasure. I felt since they backed out I should be compensated for my house being taken off the market for those 14 days

Edit: My real estate agent told me they might contest it and my house couldn’t be out back on the market till it’s resolved. So they told me they’d take that money off my closing cost instead.

1
Freedom528​•

Going through it now. I sent an email to my lender and RE agent last night telling them I'm having second thoughts.

I paid $450 for appraisal, earnest deposit was $500, waiting to hear back about attorney's fees. EDIT: Attorney's fees $500. So I would lose $1,450 if I backed out. I can make that up by buying a much cheaper property when this all blows over....

Rent is currently $1500, mortgage about $1,280. IF I'm still employed when this is all said and done, AND I'm still in the position to buy 6 months from now, then I'm making the assumption that prices will be much lower.

I have to make a decision since closing is scheduled for tomorrow.

1
alwayzathr0waway​•

I backed out before signing, no contingencies. Seller has not accepted earnest deposit and is currently threatening legal action. But I have consulted multiple attorneys who told me that, while seller is legally entitled to sue me and would likely win, the likelihood of this ever reaching court is very low because of the time and cost associated with legal action. Plus our contract says we have to go thru mediation and then arbitration first.

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Not sure if this helps, but I'm in the same boat as you.

AZ by the way. One attorney I consulted told me that I was the 7th or 8th client that week dealing with the same predicament.

1