Urgent! Help me back out a contract!

12 Replies

I have put myself in a bad situation. I will need your advise, especially from the legal side. I will talk to real estate lawyers as well but that will be Monday.

I am under contract with one house in Georgia. Here is my stupid part. I waived the due diligent and the inspection as the seller provided an inspection report to me. I still have the appraisal contingency. The reason why I did that is because all the photos and videos the seller agent provided looked so awesome and I have bought many sight unseen and have not had problems before. Considering this hot market, I don't really believe I have the chance to go there, check it and offer. So I offered like that and didn't think there will be big issue as usual.

The seller accepted the offer and the house went to binding immediately since there is no due diligent or inspection.

The binding is a few days ago, say x date. Earnest money should be paid by me within x plus 3 days. During this time, I visted the house physically and decided that I am not going to pursue the house due to various reasons after seeing the house in person. And that is not something seller can do to change, meaning even if the seller is willing to lower on the price, I still don't want the house any more. hence, I didn't pay the earnest money within x plus 3 days. Then I stupidlly assumed that the contract will be invalid as I had not paid the earnest money.

A couple of days later, the seller agent sent messages to me and told me that I could not backed out after binding. The only way is the appraisal not to the purchase price. Now I realized how seriously this could turn to. As my understanding for that market, the appraisal could be up to the purchase price and of course it cold be below. Currently Zillow's estimate is high than the purchase price. However I understand that It is totally unknown at this moment until the actual appraisal report. However I definitely don't want to risk for that since I 100% don't want to purchase the house now.

I am not sure what options have left for me now. I could just pay the appraisal to see now much the house could reach, maybe? I try to avoid going to appraisal step as it is a big rick. If it appraised higher, I will have to perform the contract which is not what I want.

I am not sure about the seller's attitude now. Seems like they have not canceled the contract yet. They have 7 days to cancel the contract if earnest money is not received per the contract. Should I offer them the earnest money and request them to cancel the contract? I have no problem paying the earnest money but my worry is that, if I offered the earnest money, they may continue on the contract.

Or I could just not applying for the loan and delay the whole process, using that to let seller cancel? I know the seller is not living on the house and they need to sell quickly. I don't think they will have problem selling to someone else for the same price or higher. But since it was under contract with contingency for me and now back to market, that may affect the house value in some cases but not necessarily. It is a hot area and selling is not a problem.

Lessens learned in a hard way this time. If you need to say I am stupid, I get it and it is totally due to my stupidity. However the most urgent thing is how to get me out of the contract. If you could share your experience or opinions or recommend any experienced real estate lawyer in Georgia, that will be highly appreciated!

That was my impression as well. But I 2x checked the contract and it does states that if the earnest money is not received, the seller has 7 days to cancel the contract. And if the seller fails to do so, sellers right to terminate will expire after 7 days. If the seller choose to not to cancel, I will still be in it that's how I interpreted the term. 

Originally posted by @Jane Blake :

@Ann Anderson it is my understanding that if the earnest money is not paid, it is not binding. Please check with Realestate attorney, but the money is what binds it was my understanding.

 

You need to come to some sort of settlement with the seller. You are in default of contract. Negotiate. See what dollar amount the seller is willing to take to let you walk away from the property.

You could be on the hook for damages if the property sells to another party for an amount lower than your current contract price.

that is the uncertain part. how could I make sure the appraisal too low? And if appraisal is above, will I be forced to buy?

Originally posted by @Jane Blake :

I would ask an attorney bc how can the contract be binding without the money? Plan B is to make sure the appraisal comes back too low

 

Thank you. I am actually suprised that the seller is not moving on and put the house back to market yet. It is a hot market afterall.

There are some misleading information in the listing especailly the pictures. The pictures make the rooms look much bigger and brighter and with heavy editting. Will that be a valid point for me to fight back?  

Originally posted by @Russell Brazil :

You need to come to some sort of settlement with the seller. You are in default of contract. Negotiate. See what dollar amount the seller is willing to take to let you walk away from the property.

You could be on the hook for damages if the property sells to another party for an amount lower than your current contract price.

 

There is no way you can 'make sure' the appraisal is too low.   As Russell said, you may be on the hook for the difference and some additional costs if they can't find another buyer at your price.  What did your realtor tell you?

On the flip side if the appraisal is well above what you offered, that may influence the seller as they can ask for more from someone else.

@Ann Anderson Some here have said that the contract is not binding without the deposit being tendered, so let's look at the elements of a contract.

The three major components of a contract are offer (your written offer), acceptance (the seller accepts your offer) and consideration (something of value changes hands).

So at first glance, it appears that you might be of the hook without tendering that deposit - HOWEVER - there is case law that treats the offer itself as a thing of value that can satisfy the need for consideration.  Here's a good resource: https://courses.lumenlearning....

There are other elements of a valid contract like proper identification of the parties and item being sold, mental capacity, meeting of the minds, etc.  If something was misrepresented, you might have a case for there not being a meeting of the minds, but that would be a battle in court - and that's expensive. 

If you are buying from a wholesaler, you could argue that because unlicensed real estate brokering is illegal in most (maybe all) states, the contract was formed for an illegal purpose and is unenforceable.  In fact, I believe that it would be not just voidable, but void at the moment it's written.  I'm not a lawyer, so check me on that.

An alternative is to tell the seller's agent that you're not moving forward and if they threaten to sue, tell them to bring it on.  Suing you will cost them money too and they may just go away, but that's a big gamble on your part.

If you want to fight this, you either need an attorney to help you, or as @Russell Brazil said, see if you can negotiate your way out with the seller.

Thank you. It is not from a wholeseller. It is just a regular MLS listing and I contacted the seller agent directly. 

i have already told the seller agent that I am not going to continue purchasing the house. 

Originally posted by @Charlie MacPherson :

@Ann Anderson Some here have said that the contract is not binding without the deposit being tendered, so let's look at the elements of a contract.

The three major components of a contract are offer (your written offer), acceptance (the seller accepts your offer) and consideration (something of value changes hands).

So at first glance, it appears that you might be of the hook without tendering that deposit - HOWEVER - there is case law that treats the offer itself as a thing of value that can satisfy the need for consideration.  Here's a good resource: https://courses.lumenlearning....

There are other elements of a valid contract like proper identification of the parties and item being sold, mental capacity, meeting of the minds, etc.  If something was misrepresented, you might have a case for there not being a meeting of the minds, but that would be a battle in court - and that's expensive. 

If you are buying from a wholesaler, you could argue that because unlicensed real estate brokering is illegal in most (maybe all) states, the contract was formed for an illegal purpose and is unenforceable.  In fact, I believe that it would be not just voidable, but void at the moment it's written.  I'm not a lawyer, so check me on that.

An alternative is to tell the seller's agent that you're not moving forward and if they threaten to sue, tell them to bring it on.  Suing you will cost them money too and they may just go away, but that's a big gamble on your part.

If you want to fight this, you either need an attorney to help you, or as @Russell Brazil said, see if you can negotiate your way out with the seller.

 

Geez...shame on both of you.  The seller never should have accepted the contract without earnest money being placed nor should you have jumped into this the way you did.  In fact, you have a contract under the law; read this: https://www.dickinsonlaw.com/b...

In "real life," when a buyer fails to place escrow - the property is immediately put back on the market and both parties move on.  But the reality is this:  the seller took the property off the market and when he did so, it cost him time and money. A "real/serious buyer" would be further along than the panic stage that you're in.  If there are realtors involved, this is quickly resolved.  If not, it's different.  I would consult a real estate attorney and submit a Cancellation of Contract immediately.  

The chaos manufactured is inexcusable.  I recommend cancelling immediately; the longer you wait, the more damage you are creating.



Originally posted by @Patricia Steiner :

Geez...shame on both of you.  The seller never should have accepted the contract without earnest money being placed nor should you have jumped into this the way you did.  In fact, you have a contract under the law; read this: https://www.dickinsonlaw.com/b...

In "real life," when a buyer fails to place escrow - the property is immediately put back on the market and both parties move on.  But the reality is this:  the seller took the property off the market and when he did so, it cost him time and money. A "real/serious buyer" would be further along than the panic stage that you're in.  If there are realtors involved, this is quickly resolved.  If not, it's different.  I would consult a real estate attorney and submit a Cancellation of Contract immediately.  

The chaos manufactured is inexcusable.  I recommend cancelling immediately; the longer you wait, the more damage you are creating.

Appreciate that.  Will submit a release form asap to the seller agent.  I will of course sign and hope the seller will sign to get this over. 

 

@Ann Anderson , since you are an honest person of your word, I think you should purchase the property if it appraises. Rent it for two years and then evaluate keeping it and rent it or sell it and take your profit. Your self esteem is valuable. Don’t throw it away for money.