Q: We are under contract to buy a house and we’re supposed to close tomorrow. Is there any way we can get out from under the contract and cancel the escrow? We are sick of the house already.
A: I don’t know if you can cancel your contract. You have to review your contract to see whether there is a legitimate out for you other than being “sick of the house already.”
Typically, contracts don’t provide an out for people who simply change their mind. I’m not an attorney, but a purchase contract binds a buyer and a seller to a specific deal. If your seller had wanted to cancel the contract to sell the home to another buyer who had offered more money, you would be running to court to sue the seller. Likewise, a seller may have legal rights against you if you fail to honor the terms of the agreement.
Contracts give buyers some ability to get out of the deal. These outs are usually related to your inability to get financing, if the house doesn’t pass inspection, if the house doesn’t appraise out in value, or if the seller is unable to give you clean title to the home. But in each of these instances, the contract usually has a provision that would give you the right to walk from the deal.
If you don’t have a legal right to walk from the deal, the seller will have certain legal rights against you for your failure to close. Typically you might forfeit your down payment or earnest money deposit. But in some cases, the contract might allow the seller to sue you for damages. Those damages could be far in excess of your down payment or earnest money deposit.
The best person to talk to is a real estate attorney, who can look over the documents you’ve signed and help you figure out what’s going on with your deal, help you negotiate a termination of the contract, and lessen your damages under the contract.
March 20, 2009