How do you back out of a deal?

6 Replies

Good morning everyone,

    I have two contracts that I've had approved by an attorney; an Offer to Purchase (with a section for subject to financing) and a Lease Option. Both forms contain exit clauses. The Offer to Purchase contains a clause stating that the deal is contingent upon finding a qualified resident to occupy the property, and subject to "someone's" approval (i.e., my partner, my fiance). The Lease option contains the same clauses.

    My question is, how would you actually back out of a deal after you've done your due-diligence and discovered the deal wasn't good enough? Do you write a letter to the owner stating "Hi Mr. Seller, my partner didn't approve the deal", or "Hi Mrs. Seller, unfortunately I was unable to find a qualified resident to occupy the property."

    Thanks!

                  Mike

There are a lot of ways to get out of a deal.  However, the first thing that I'd do is talk to the seller about the situation.  If the numbers aren't good enough let him know.  Remember if you are dealing with a motivated seller they can still be flexible enough to make the deal happen.  It's nice to have escape clauses.  But also focus on how to make the deal work!

Well right, but let's say absolutely last resort you have to back out of a deal. What do you do? Tell the seller verbally?

Michael, I'm actually pretty much interested in financial responsibility of defaulting on a deal.

My understanding for related costs is:
- around $1000 put on agreement with seller
- property marketing costs

Are there any other costs involved?

Originally posted by @Michael King :

Good morning everyone,

    I have two contracts that I've had approved by an attorney; an Offer to Purchase (with a section for subject to financing) and a Lease Option. Both forms contain exit clauses. The Offer to Purchase contains a clause stating that the deal is contingent upon finding a qualified resident to occupy the property, and subject to "someone's" approval (i.e., my partner, my fiance). The Lease option contains the same clauses.

    My question is, how would you actually back out of a deal after you've done your due-diligence and discovered the deal wasn't good enough? Do you write a letter to the owner stating "Hi Mr. Seller, my partner didn't approve the deal", or "Hi Mrs. Seller, unfortunately I was unable to find a qualified resident to occupy the property."

    Thanks!

                  Mike

 I don't think there is a credible way to use those types of clauses, regardless of how you communicate them - personally, I would not take you seriously in the first place, if you had a clause "subject to approval by my partner" in the contract.  This clearly signals that you have no stake in the deal, intend to tie up the property at the seller's expense, and are ready to ditch them at any time and for any reason.  Maybe that works for a desperate or very naive seller, but I have my doubts.

Don't think too much into it Mike like @roland said go back to the seller and let him know that the numbers are too high. Find a way to close the deal. Good luck!!

Right, that's the plan. But I am still wondering how you do it, simply to quench my curiosity.

    Mike

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