Real Estate Contract

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Real Estate Contract

Alex Wong
Baltimore, MD · Member since 2016 · 30 posts · 7 votes

I have a question about real estate contract in general. From my understanding, there are mainly two ways to get out of a contract. Home Inspection and home appraisal. I am asking mostly for the scenario when I have buyer remorse after making an offer (offered too much) 

If I want to use home inspection to get out of a contract, I can use an inspection notice. 

1. What if the inspection comes out mostly clean, can I make up reasons to get myself out? Or does it have to be structurally/mechanically related or legitimate? 

2. However, if the seller agrees to fix everything, can I still elect to void the contract? What happens if the seller agrees to fix everything important but leaves one unfixed?

In terms of home appraisal, what if the appraised value comes out to be lower but the seller agrees to the full price reduction? Can I still choose not to accept his ? 

Also, I would like to know what some of the common contingencies/addendum I can put down to help me back out of a contract. 

Thanks,

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Mindy JensenPro Member
BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
9y

@Alex Wong , it sounds like this is a hypothetical question, rather than a situation you are currently in.

You do not have to give a specific reason for canceling the contract using the home inspection. However, if you do this too frequently, your agent will drop you as a client because you don't seem serious.

Running the numbers before you make an offer, and making a solid offer based on math not emotions will help you be more confident in your offer.

You can write just about anything into a contract, however the more addendums and contingencies you put into the contract, the less solid your position seems and the less likely you are to have your offer accepted in the first place.

You can also get out of a contract through a mortgage contingency - your offer is contingent upon getting a loan at X%. If you are denied the loan, or you can't get it at the right price, you can cancel the contract - as long as you do it within the alloted timeframe, which is stated in the contract.

Why are you so concerned about this before you make an offer? 

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  • Kevin Siedlecki
    Investor · Madison, CT · Member since 2014 · 710 posts · 458 votes
    9y

    @Alex Wong, You could theoretically walk for any reason after the inspection, but that's not good business. If you have any ambition of making a career out of investing, you have to close on the deals you agree to. Is this a real scenario, or a hypothetical?

    My advice is to do the math correctly before you even visit a property, never mind make an offer. I don't think you're going to be met with much goodwill by the people of BP, because you're basically asking, "How can I pretend to want to make deals, but really just waste everyone's time?" 

    Sorry to be harsh, but that's how you're coming across here. Know your numbers going in, make offers that make sense, and close when offers are accepted.  You will never have long term success if your primary concern is how you can legally weasel out of an agreement.

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  • Alex Wong
    OP
    Baltimore, MD · Member since 2016 · 30 posts · 7 votes
    9y

    If I am correct, I will risk being sued if I walk away from any point of the contract without a good reason because it is a breach of contract. Hypothetically, the seller can choose to not make an effort to sell the property at substantially lower price to another buyer and sue you for the difference.

    Perhaps I am asking the questions in the wrong tone. I am interested in knowing my legal rights as an investor to protect myself.

    Mistakes happen. Analysis can be wrong upon further review. The area you think is good comes out not to be so. Sometimes, you fall in love with the wrong properties. 

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  • Rusty Fuller
    Investor · East Hartland, CT · Member since 2013 · 2 posts · 0 votes
    9y

    The contract (purchase and sale) will define your rights.  You can put almost any term you desire in the contract.  If you want the ability to change your mind for x, y or z reasons, say that.  There is also the concept of good faith in contracts.  You can abuse a contract right such as an inspection clause by asserting it in a way that was not intended and to attempt to gain unfair advantage, in which case you are essentially breaching the terms of the agreement and your reputation will follow.

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  • Mindy JensenPro Member
    BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
    9y

    @Alex Wong , it sounds like this is a hypothetical question, rather than a situation you are currently in.

    You do not have to give a specific reason for canceling the contract using the home inspection. However, if you do this too frequently, your agent will drop you as a client because you don't seem serious.

    Running the numbers before you make an offer, and making a solid offer based on math not emotions will help you be more confident in your offer.

    You can write just about anything into a contract, however the more addendums and contingencies you put into the contract, the less solid your position seems and the less likely you are to have your offer accepted in the first place.

    You can also get out of a contract through a mortgage contingency - your offer is contingent upon getting a loan at X%. If you are denied the loan, or you can't get it at the right price, you can cancel the contract - as long as you do it within the alloted timeframe, which is stated in the contract.

    Why are you so concerned about this before you make an offer? 

    [email protected]Podcast Guest on Show #261
    BiggerPockets
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