Back out of deal? I don't know what to do

Buying & Selling Real Estate
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Back out of deal? I don't know what to do

Taylor Robertson
Member since 2022 路 26 posts 路 13 votes

Background: (Kansas) My first deal was going to be a house hack on a duplex. We were set to close on 2/24. However, hours before we closed, the house caught on fire due to the fireplace being used by the tenants. There was no structural damage because the fire was contained to the outer edge of the house in one small area-mainly drywall and flooring needs replaced. Tenants and current owner were both aware that the fireplace needed service due to inspection report, yet continued to use fireplace without servicing it. Closing was obviously pushed back.

Fast forward to today. My agent said that my lender is now requiring that a structural engineer come out for a re inspection of the house is structurally safe after seller's insurance finishes up repairs. Additionally, they are saying that the house will need reappraised, I must disclose what happened to my insurance (which could mean my premiums go up), and that I will need to sign a hold harmless agreement at closing. Closing was pushed back to 3/16, which is the day my interest rate lock ends. The repairs will not be done by then.

What can be done to resolve this situation? Should the seller buy back down the interest rate because it was gone up substantially since the lock? Can purchase price be renegotiated? According to my agent, the seller is desperate to sell because she needs the money. I too want it because there is no other duplexes available in my local market. Do you see a way to leverage the situation?

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  • Ryan Lesley
    Real Estate Agent 路 Fort Collins, CO 路 Member since 2023 路 171 posts 路 116 votes
    3y

    Hey @Taylor Robertson, 

    First off, sorry about the situation you've found yourself in. definitely throws a wrench in the plans, but as you have already said there may be some upside to the situation. 

    Aside from all the things that the bank are requiring: inspection and reappraisal,  I would definitely re-run all your numbers once you find out if this will impact your insurance premiums. I'd also be interested in finding out how exactly the hold harmless agreement impacts your/their liability and what it entails. that alone may be enough reason for either backing out of the deal or seeing an adequate discount on the purchase price due to your increased risk.  

    I would also check with your agent to see what built in provisions there are in the purchase contract that would, if you chose to do so, give you a legal way of backing out of the contract. I know here in Colorado buyers are given a plethora of outs, I'm just not familiar with Kansas contracts. In the end though I hope it works out for you one way or the other. best of luck 馃馃崁

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  • Jaron WallingPro Member
    Rental Property Investor 路 Indianapolis, IN 路 Member since 2018 路 4k+ posts 路 4k+ votes
    3y

    "According to my agent, the seller is desperate to sell because she needs the money" - I'd listen to your agents advice considering everything you described. This is an unfortunate situation for everyone involved. It sounds like a smaller cosmetic fire but if the repairs are completed correctly why fear a new appraisal? If anything the value should be higher. 

    Lenders can extend a rate lock. Ask your lender and see what they can do. My lender can extend a lock for 7 days but every leader is different. You'll never get a 30 days out of them but given the situation I'd bet they can extend. Can't really speak for the insurance premiums but again that's less of a concern. If the repairs were done CORRECTLY with PICTURES you don't have much to fear. If the premium goes up 10% do the number still pencil out? 

    I doubt you can leverage the situation other than asking for buyer credits or something. You can ask for anything but it doesn't mean the seller will accept. They're probably losing more $$$ than you think getting this property sold. Worse case your agent can legal advice to back out of the contract. 

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