Backing out of a contract

So there is a short sale I have approved that is ready to close. I got an offer that barely makes me a profit but since I had 2 other offers fall through I didn't want to take the chance I just wanted to get it done.

I signed the contract last week with about 4 contingencies and today I get a much better offer that I would like to accept. My question is, how can I back out of the offer and accept the other offer. My attorney said they have until sept 6 the get a mortgage commitment and only then can I back out, but I was wondering if anyone has any creative ideas or ways for me to do this without getting in any legal trouble. The buyer is yet to order an appraisal or inspection. As of now this is where I stand, any ideas would be appreciated.

Thanks

Ali Samana

Real Estate Investor · Corpus Christi, Texas

389 posts
8 awards
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Aug 10 '10, 05:47 AM

Lafi, If you have an offer that you agreed to I would not look for ways out of that contract to make more money. In this situation (from what I gather) you are still making a profit, just not as much as you would like. I would take the profit happily and start working on another transaction. If you back out, the buyer might tell others about it costing you potential business. I would just honor the contract.

Not what you wanted to hear I am sure, but just my .02.

Richard Warren

Real Estate Investor · Las Vegas, Nevada

1,826 posts
12 awards
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Aug 10 '10, 06:19 AM

I have to echo what Ali is saying. Your #1 asset in this business is your reputation - don't squander it to make a few extra dollars.

:cool:

Matt Eilers

Real Estate Agent · Breckenridge, Colorado

70 posts
1 award
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Aug 10 '10, 06:21 AM

Assuming it is a standard contract, you don't have much of an out as a Seller unless the Buyer does not meet one of his/her requirements (such as loan conditions).

One of the other outs is the Home Inspection. If they object to items that they would like fixed or given a credit for and you do not come to an agreement by the Resolution Deadline (or whatever your terminology is for your contract), the contract terminates (in Colorado, the following day).

Typically, a Buyer is set to perform a contract under the Liquidated Damages clause which means they sacrifice their Earnest Money IF they do not close yet everything else was fine.
A Seller is typically under Specific Performance which means they have to close if all conditions are met or the Buyer can potentially pursue legal action.
The general gist of it anyhow.

As for a creative way out, you can always go to the Buyer and be upfront and say you would like to pursure another contract and offer them their Earnest $$ + $XX amount of dollars (whatever you feel is worth it to you to take on the contract you want) if they terminate the contract. At least I see no reason why you couldn't. Up to you if you want to take $$ out of your pocket if they take you up on the offer.

Otherwise, your only option if to fullfill the contract or play hardball when it comes to the Inspection Objections and then that is not a guarantee that they will back out of the contract either. Might not be a bad idea to let it play out, better to close and have a little money as no guarantee that the other contract that is higher would successfully close.
Matt

Lafi S.

Wholesaler · North Jersey, New Jersey

213 posts
3 awards
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Aug 10 '10, 06:34 AM

Well here is the thing about this offer,

I agreed to the deal with some contingencies from both myself and from the buyer. It is an FHA loan and the buyer is requesting that I do repairs on the property to make sure they get the commitment. I also agreed to a 10,000 credit. But the repairs are still open to negotiation since they won't be discussed until after the appraisal.

I certainly want to honor the contract if there weren't so many ways I can lose this deal later on down the line. I am literally going to be counting dollars not to LOSE with this offer whereas there is a substantial difference in profit on the other offer, not just a few dollars.

Maybe reaching out to the buyer will be best but I definitely don't want them to pursue legal action against me.

Jackie Patterson

Real Estate Investor · Kalamazoo, Michigan

666 posts
8 awards
50 influence

Aug 10 '10, 06:36 AM

Take the second offer as a backup offer. Let them know you have contingencies that need to be removed by Sept. 6. If they really want the property they may be willing to wait and see if the contingencies are met.

If the contingencies are met, honor the contract.