Can home buyer opt out of a purchase contract?
Dear Mr. Feichthaler,
I recently contracted to purchase a house in Cape Coral, and planned to move there from Cincinnati. I planned to borrow money to buy the house, so the contract requires that a loan be approved, and that the property is appraised at the purchase price or higher. Last week, I found out that my mother is going to require constant home care, so I want to stay in Cincinnati to take care of her and not buy the house. Can I cancel the contract, or will the sellers sue me? The last thing I want is to create more stress than I already am feeling.
– Coreen B.
Dear Coreen,
I have many clients that have made the decision to take care of their parents and put their immediate plans on hold. It is important to consider how you approach this situation carefully so you do not create additional burdens on yourself. For purposes of the answer, I assume you placed a $10,000 deposit in escrow for this purchase, and that the purchase is $200,000. I also will assume that the appraisal and loan commitment have not been completed.
First, understanding the contract you signed is an important first step. Typically, if the contingencies of the contract are not met (e.g., appraisal is low or loan is not approved), you can be released from the contract with written notice to the seller, and receive your entire deposit back. The contract requires that you use your best efforts to obtain the loan.
Rather than wait to see if the appraisal is low, many times it is advisable to contact the seller (through your Realtors, if you are using one) to see if they would consider letting you out of the contract under the circumstances. You would be surprised how many people will be sympathetic to the situation and return the deposit to you, even if they have a legal right to keep it. Generally, there is a “middle ground” where the seller may agree to return a portion of the deposit and retain a portion, to cover the carrying costs of the property that the seller will now be holding longer.
Due to the uncertainty of the appraisal and loan approval, you have the leverage to negotiate the return of all or part of your deposit at this time. After the loan is approved and the appraisal comes in at the sales price, you will have no legal basis to get out of the contract. If you do not go through with the purchase after contingencies are met, the seller usually has two options: First, the most common is to retain the deposit and take no further action. Occasionally, the seller will choose the second option, which is to enforce the contract, and require specific performance by the buyer. That is, force the buyer to go through with the purchase. I am always seeking to bring more certainty to my clients, so I generally advise to not procrastinate resolving a situation like this. Both you and the seller will benefit having certainty going forward if an agreement can be reached.
Good luck to you and your family.
Eric P. Feichthaler has lived in Cape Coral for 28 years and graduated from Mariner High School in Cape Coral. After completing law school at Georgetown University in Washington, D.C., he returned to Southwest Florida to practice law and raise a family. He served as mayor of Cape Coral from 2005-2008, and continues his service to the community through his chairmanship of the Harney Point Kiwanis Club KidsFest, which provides a free day of fun and learning to thousands of Cape Coral families, and funds numerous scholarships. He has been married to his wife, Mary, for 14 years, and they have four children together. Recently, he earned his board certification in Real Estate Law from the Florida Bar. He is also a Supreme Court Certified Circuit Civil Mediator.
his article is general in nature and not intended as legal advice to anyone. Individuals should seek legal counsel before acting on any matter of legal rights and obligations.