Buyer (I) wants to back out of the contract, my options?

Question

Hi,

I am in New Jersey state. I am a buyer under contract on a property with all contingencies on track to be completed. Inspection - seller agreed to all requested repairs, credit. Mortgage - approved.

But I do not want to go forward with this deal now. I put in a earnest money deposit of $10k. About 3% of the purchase price. What are my options at this point. My attorney spoke with seller attorney but the seller insists that I am obligated to move forward with the transaction per the contract. What if I just don't show up for closing? what are my options and seller options?

Thanks for pitching in.

Jay Hinrichs · Answer

I highly doubt that you could have filed a lis pendance lawsuit over the circumstances of you backing out at no fault of the seller.. THE deposit money could have been tied up for years been there done that but for keeping them from reselling because your going to tie it up in court .. no attorney would take that on they would have liability for slander of title.

Sam Bans · Answer

Sharing the final outcome of this for benefit of the community. So about 2 weeks before closing, i had my attorney proactively reach out to seller attorney to let them know that I am not willing to move forward. Initially the seller resisted ( I don’t blame him) insisting that I am obligated to close as per the contract. Eventually he accepted to reach a settlement so both of us can move on and he can put the property back on the market. We mutually agreed to split the deposit in half - so $5k each - and terminate the contract. That should more than cover his costs for the contract (2 months of carrying costs of $1800 plus his attorney fees say $1400). In all, this one bad decision costed me $7,500 ( including attorney fees, inspection, appraisal) to unwind but the way I am looking at it is that I saved myself getting into a $300k headache. At least that lets me sleep better 😋big shout out to this community for advising.

Wayne Brooks · Answer

Account Closed Tying the seller’s property up for years is an empty threat. Once the closing date passes, and the buyer doesn’t perform, the contract is dead. An EM resolution caused no restrictions on selling the property….with or without a lawsuit concerning the EM.

Eric James · Answer

Theoretically the seller could try to make you purchase the house, but practically that would be near impossible. Seller is entitled to all your earnest money and has no reason to return it.

Eric James · Answer

If there are no remaining contingencies in your contract you purchase or lose your earnest money. Period.

Account Closed · Answer

You may be correct, but I am not 100% positive.In about 2002, I purchased a 24-unit apartment building with a 60-day escrow with a 30-day extension. My broker was in contact with the seller and his broker every day until the 60-day period passed. The seller and his broker knew my bank was going to fund the loan in 3 to 5 days. On the 61st day, the seller's broker sent us a communication saying that we (the buyers) did not give the seller a written notice stating that we wanted to extend the escrow. The seller's communication (can't remember what type) said the seller was going to keep my $50,000 earnest deposit.I paid about $50,000 to get a hard money loan for only about 3 days and my loan broker was furious and said I had the upper hand and should have tied up the property with a lawsuit. Of course, I've been through real estate lawsuits previously and for one purchase it took exactly 5 years to settle the case down to the very last hour where if I did not show up at the court I would have lost the case.

Account Closed · Answer

You still have a great chance for backing out and get 100% of your money back. At this time, any seller with half a brain doesn't want you to tie the property up for several years to settling a lawsuit. Tell the seller you want to get out of the deal, you want your money back, or he can tie up selling his property with a lawsuit for as long as 5 years. You should offer to pay back any direct costs paid by the seller.I am totally the opposite of most people who sell anything from a small appliance to something as large as a house. I don't want someone to buy something from me because they made a commitment. I want people to be happy with their purchase and if they change their mind anywhere before the close of the deal then I don't want to force them to continue with the purchase and I will find another buyer.About 6 weeks ago, I had a house that was in escrow for about 45 days and the escrow was supposed to close in 30 days. The buyer kept insisting that I install new water pipes in the house when three plumbing companies said the house had Kitec (an inferior brand of piping), but the pipes were in perfect condition. We got three estimates to install new piping for prices between $6,000 to $9,000. I had just painted and carpeted the house. So, I did not want plumbers destroying walls and ceilings in this 2-story house and then I would have to plaster holes and paint. i knew that if I installed new pipes the work would take 4 to 6 weeks until it was 100% completed and then my buyer could still back out after I worked hard and spent a lot of time to make him a happy camper.I offered the buyer a $10,000 discount and he kept waffling about continuing with his purchase. So, I told him he could back out, get 100% of his money back and he accepted. Two days later, an experienced investor purchased the house, I gave him a $10,000 discount and the house already closed escrow.

Kim Tucker · Answer

I'm not an attorney and would adivise you to talk with one, but my experience here in Kansas City.You have $10,000 in escrow - presumably with a Title Compay. If you don't close the title company will not release the earnest money to the seller with out your approval. And they will not close for the seller with a new buyer until that earnest money is released.So you could not close and not agree to give them the EMD and hold it hostage. Their next options are to move the closing to a new title company with a new buyer and you don't get your EMD, but neither do they. (for this scenario, I would think you might be able to negotiate to agree to release half to them and half to you and they might go for it)Your seller's next option would be to sue you for specific performance (I think that's it), but to force you to close or to compensate them for not closing would cost them a lot of money up front.Also do you have any contingencies left, maybe you could not get approved for your loan, or you could have an inspection issue.And how bad is the deal, maybe the $10 EMD loss is better than moving forward.Let us know how it turns out.

Deanna O. · Answer

SamWould you have been willing to go through the amount of hassle that the seller did for a measly $2k? Probably not. Not to mention that once a property has fallen out of escrow other potential buyers tend look a bit askance at it, wondering what is wrong with the property that caused the sale to fall through. Total damages to the seller probably exceeded the $5k he got (As in cash costs, emotional toll, possible loss of value/additional time to sale, etc).

Sam Bans · Answer

Thanks for sharing seller’s perspective. At this time, escrow is settled already so water under the bridge now. My attorney said that the seller is well within his rights to put the property back on the market once we notified that we are not moving forward with the purchase. Do you think that the seller is obligated to settle the escrow before going into another contract? Would I have had a hold/lien on his title because of this open escrow? I am in New Jersey. If yes, then that was definitely my leverage that I didn’t know I have. Oh boy! (His direct costs by my calculations would have been ~$3k and I ended up giving him $5k).