How to back out and not lose EMD? Help pleeeassee…

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How to back out and not lose EMD? Help pleeeassee…

Account Closed
Delaware/Maryland/New Jersey/Virginia/Pennsylvania · Member since 2019 · 33 posts · 9 votes

Hello everyone! Please help!!! Here is my situation & hopefully you can give me some enlightenment on what to do.

I'm under contract on a property (through FHA loan) in Salem County, NJ.

The asking price is $225K and I offered $235K. Buying ‘as is’, no contingencies. But I asked the listing agent first if there was anything that I NEED TO KNOW before we draw out the contract, hoping that I could trust him. He said it’s a flip, nobody lived there. There are no disclosures. So, I said, okay, I trust you. (It’s legal in NJ without seller disclosures). But isn’t that…

“Real estate agents must make a “reasonable effort to ascertain all material information concerning the physical condition of every property for which he or she accepts agency” and disclose this “to their client or principal and when appropriate to any other party to a transaction.” ??? 

So anyhow, we opened escrow, put my $3K deposit last week. We had an inspection today, and came to find out that there are major termite and mold issues in the house. It looked nice in the inside but of course underneath, I did not see what was the problem. On top of other issues that was from the inspection report.

I was in a hurry to get this property and hoping to close by the 12/30, as my parents are coming from the Philippines 🇵🇭 My mother just got diagnosed of Parkinsons and I am just trying to help them out.

My question is: is there a way I can get out of this contract and get my EMD back?

I’m so sorry for this long message, but I don’t know what to do. Thank you for your time. 😔

If you are a real estate attorney in NJ please let me know. Thank you so much. 

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Jessica Tsao
Lender · CA · Member since 2019 · 82 posts · 46 votes
4y

FHA loans require an appraisal and the appraiser is required to look for termites and will not approve the loan with termites. A professional inspection is required to determine termites and must be remedied to approve a loan with FHA. did you waive loan contingency? Did you waive appraisal contingency? If you waived all the contingencies? If all else fails, I would talk to your agent, FYI online reviews is really big now days.. . Good Luck

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  • Jennifer Jo McCallonBusiness Member
    Member since 2020 · 62 posts · 59 votes
    4y

    Depends on the contract. First of all, I highly recommend everyone who buys or sells real estate take a serious contracts class and get some legal education. I have been taking law school classes p/t on the side and it has helped me understand things so much better. 

    Second, I'd say ask to cancel and ask for your earnest money back. Some sellers will do the right thing rather than jump through legal hoops, start there. Say as little as possible beyond noting that there is undisclosed damage and you would like to cancel the contract. Finally, review the contract carefully for an out- there is probably one in there- but nobody here can really answer without seeing the terms of the contract specifically.  Good luck to you.

    [email protected]510-545-6390
    4Reply
  • Harry Arnold
    Flipper/Rehabber · Hazlet, NJ · Member since 2017 · 61 posts · 110 votes
    4y

    “some sellers will do the right thing”?

    The seller sold a property as-is and now the buyer wants to back out because they found something they don’t like. Hate to sound harsh here - however, maybe the buyer will do the right thing. And that is buy the property as agreed upon “as-is” or lose the earnest money. The right thing to do is not place blame or try to squirm out of a contract you signed. It’s not like you’re forced to buy it - you just lose the earnest money. What’s next, buyers start asking for inspection fees, inconvenience fees or whatever else they want. 

    2Reply
  • Matthew Olszak
    Real Estate Broker · Chicago, IL · Member since 2015 · 1k+ posts · 2k+ votes
    4y
    Originally posted by @John Brodeur:

    @Matthew Olszak, I have seen the same generic statements / home inspection reports. Things like "roof failed - past useful life expectancy should replace". The buyers often freak out (as I did the very first time). Then you call a licensed roofer who examines and confirms that while the roof is older than xx years old there are no issues, no active leaks, and should be fine for 5 to 10 years more depending on weather/conditions. This is very different than the roof failed and needs to be replaced right away. 

    In PA most of the home inspection reports I've seen state the generic term "have a licensed (insert professional roofer, plumber, electrician etc. inspect)."

    I know that today's market is hot, and there are is a lot of competition between buyers, but I think this trend of waiving inspection contingencies for first time homebuyers, or primary residence buyers really puts people in tough spots. Unless you are comfortable with taking on that risk and have the cash on hand for fixes / repairs of potentially larger issues it is not a good idea IMO. 

    On the other hand if you are an experienced investor / have the cash on hand to handle major repairs you can certainly waive inspections on certain properties (and often will need to in order to make an offer that the seller will accept.) 

     When I was a broker, I was very lucky to partner with a super solid home inspector who knew how to write his reports to maximize repair negotiations, while setting realistic expectations with our buyers. But, as is their right, some of my clients had their own inspector who their friend/family used who finds "everything". Like the ever reliable, "The polarity of the outlet is reversed and this poses a fire hazard, consult with a licensed electrician to repair and further inspect. May be indicative of unpermitted repairs to the electrical system."

    Don't get me started on the roof though. Beyond being previously a broker, I also own a licensed roofing contractor firm, with myself as the qualifying party (meaning I passed the licensing test personally). It was brutal to be at an inspection and see not only how wrong they were with remaining life of a roof, but how much they'd MISS. It'd be a slightly ugly 3 tab, but they'd miss the water damage to decking, missing granules due to hail, and lifted/creased tabs. And I'd have to stand down most of the time, lest my clients think I'm just telling them the roof is fine because I just want to make a sale.

    I agree with you 100% though, if someone doesn't know construction, they should never waive inspection contingencies, even in a new build or heavy remodel. There are plenty of jobs where the work looks nice on the surface, but its either complete hack work or covering major issues.

    I'm still interested in seeing the inspection report noting termite damage, its a shame the OP deleted their account.

    3Reply
  • John Brodeur
    Investor · Philadelphia Metro · Member since 2019 · 44 posts · 75 votes
    4y

    @Jennifer Jo McCallon, I couldn't agree with you more. I can't count the times that the business law class I took in Undergrad has helped both in my W-2 job when reviewing vendor contracts, and in the real estate investing side. 

    1Reply
  • Jennifer Jo McCallonBusiness Member
    Member since 2020 · 62 posts · 59 votes
    4y

    To be clear, by "Do the right thing" I mean, if they tried to cover up known damage and didn't disclose it, they should give back the earnest money. Any broker worth his salt knows the #1 rule of real estate is DISCLOSE. Sounded to me like they covered up termite damage or similar, but I have no way of knowing.  If they knew of damage, it would be in a transfer disclosure statement or seller property questionnaire. Now if they didn't know, that is a whole other things, and they may pretend to not know, but actually know, and that is where the "do the right thing." comes in. 

    [email protected]510-545-6390
    1Reply
  • David Smith
    Rental Property Investor · NJ/PA · Member since 2016 · 555 posts · 149 votes
    4y

    Simple. 

    Seller cannot keep your deposit in NJ if the deal fails.  

    0Reply
  • Kurt Baltutat
    Investor · Knoxville, TN · Member since 2017 · 25 posts · 8 votes
    4y

    test

    0Reply
  • Harry Arnold
    Flipper/Rehabber · Hazlet, NJ · Member since 2017 · 61 posts · 110 votes
    4y

    just out of curiosity - does a background story like; I’m doing this for my elderly, frail parents from another country - eliminate the need to abide by a contract?  

    0Reply
  • Jim K.
    Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
    4y

    This story boils down to this:

    1. I know next to nothing about residential building construction, but I bought this place as-is with no inspection contingency.

    2. I asked the seller's agent (who was also the seller) if there was anything wrong with the place. The seller said no.

    3. After the sale, I learned things (somehow) that make me suspect that the seller knowingly failed to disclose major termite damage.

    4. I feel I was done dirty by the seller, I want to back out of this sale, and I want to get my earnest money back.

    5. I didn't like the questions and answers I was getting to my dilemma, so I closed my account, or I lashed out at someone and Bigger Pockets closed my account for me.

    3Reply
  • Crystal SmithPro Member
    Moderator
    Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes
    4y
    Originally posted by @Account Closed:

    Hello everyone! Please help!!! Here is my situation & hopefully you can give me some enlightenment on what to do.

    I'm under contract on a property (through FHA loan) in Salem County, NJ.

    The asking price is $225K and I offered $235K. Buying ‘as is’, no contingencies. But I asked the listing agent first if there was anything that I NEED TO KNOW before we draw out the contract, hoping that I could trust him. He said it’s a flip, nobody lived there. There are no disclosures. So, I said, okay, I trust you. (It’s legal in NJ without seller disclosures). But isn’t that…

    “Real estate agents must make a “reasonable effort to ascertain all material information concerning the physical condition of every property for which he or she accepts agency” and disclose this “to their client or principal and when appropriate to any other party to a transaction.” ??? 

    So anyhow, we opened escrow, put my $3K deposit last week. We had an inspection today, and came to find out that there are major termite and mold issues in the house. It looked nice in the inside but of course underneath, I did not see what was the problem. On top of other issues that was from the inspection report.

    I was in a hurry to get this property and hoping to close by the 12/30, as my parents are coming from the Philippines 🇵🇭 My mother just got diagnosed of Parkinsons and I am just trying to help them out.

    My question is: is there a way I can get out of this contract and get my EMD back?

    I’m so sorry for this long message, but I don’t know what to do. Thank you for your time. 😔

    If you are a real estate attorney in NJ please let me know. Thank you so much. 

    It seems to me through the last sentence in your post- "if you are a real estate attorney in NJ please let me know" that you are looking for free advice from an attorney on this forum. Higher an attorney right away and have him/her cancel the contract and get your EMD back.

    312-681-7487
    1Reply
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