Now I’ve changed my mind. How do I get out of it?
Prospective homebuyers who want to escape a purchase contract should turn first to the agreement itself. Most states require that real estate contracts be in writing to be enforceable, and most real estate contracts include contingencies, or conditions, that must be met for the deal to close.
Contingencies offer various ways to cancel a contract up until the minute when the contingency is either met or its associated time period expires. Which contingencies are included in a contract depends on state law, local custom, and negotiations between the seller and buyer. Some examples of common contingencies include appraisals, home inspections, and an inability to get a mortgage and title. For instance, if the property isn’t appraised at the value that they agreed to, the bank isn’t going to give the buyer the money to buy the property, so that’s obviously a definite out.
If the contingencies don’t offer an out, another option is to breach the contract. Taking this step is a major decision because it could result in forfeiture of the buyer’s earnest-money deposit or a lawsuit brought by the seller as well as accusations of bad faith and loss of any sums the buyer has spent on an appraisal, title report and home inspection.
Some buyers try to finesse a contingency to create a loophole that doesn’t legitimately exist, so they can break out of a contract without a breach. An example would be pressuring the seller to make unnecessary or excessive repairs in a deliberate effort to kill the deal. This strategy is also an instance of bad faith.
Many real estate contracts contain a liquidated damages clause, which specifies how much the seller will get if the buyer breaches the contract. The sum may be equal to the deposit or down payment, but could also be some other amount. If you breach and don’t have an excuse that’s permitted under the contract, then the seller retains your down payment as liquidated damages. Liquidated damages compensates the seller for any lost opportunity during the time that the home was off the market.
If the buyer breaches the contract, the seller may resort to a lawsuit for specific performance. Essentially, specific performance means a court will force someone to go through with whatever he or she promised to do. This type of lawsuit is rare, perhaps because sellers realize the buyer may not have the money needed for a judgment. But if the seller can’t find another buyer and believes the one who breached the contract can complete the purchase, specific performance may be ordered.
Legalese aside, another option for buyers is to confess that they can’t or don’t want to purchase the house, perhaps due to buyer’s remorse, job loss, or other financial setback. However, this is contingent upon how empathetic the seller is to your disposition.
Newton, MA Real Estate lawyer Attorney Alan Segal serves the Greater Boston region and all of Massachusetts in real estate law, business law, and estate planning including Acton Agawam Amherst Andover Arlington Attleboro Barnstable Belmont Beverly Billercia Boston Braintree Bridgewater Brockton Brookline Burlington Cambridge Canton Chelmsford Chelsea Chicopee Danvers Dartmouth Dedham Dracut Easton Everett Fall River Falmouth Fitchburg Framingham Gloucester Haverhill Holyoke Lawrence Leominster Lexington Lowell Lynn Malden Marlborough Medford Melrose Metheun Milford Milton Natick Needham New Bedford Newton North Andover North Attleboro North Reading Norwood Peabody Pittsfield Plymouth Quincy Randolph Revere Salem Saugus Shrewsbury Somerville Springfield Stoughton Taunton Tewksbury Waltham Watertown Wellesley Westfield West Springfield Weymouth Woburn Worcester.