Hi there. Emily Farber with Lepic-Kroeger, Realtors in Iowa City, Iowa. Thanks for
joining me. Today's video covers the topic of what
happens if you change your mind. Buyers, you enter a contract all is going
grand until suddenly it's not. You've had a change of heart. You've got cold feet.
Your circumstances have changed. Whatever the reason, you no longer wish
to buy the home that you have set forth. What do you do now? What might happen
what could be the potential outcomes of such a decision? Stay tuned.
All right, let me start this off by saying I am NOT an attorney, I don't play one on TV, I don't
have a night job as an attorney, so if you have legal questions I highly, highly
recommend that you consult a real estate attorney. When you find a property that
you're interested in and you write a purchase agreement on it you enter a
legal and binding contract once the terms of that agreement have been met.
If it's got a buyer signature, a seller signature, and there has been
consideration, a.k.a. earnest money presented and accepted, you are in a
legal and binding contract. Now, if you change your mind right away before the
seller has even signed there still is time to back out. Have your agent write a
written withdrawal with a time stamp on it and have that presented to the
sellers agent. No harm, no foul, you've stopped everything before it even gets
moving forward. But, if you are already into an accepted purchase agreement
things are a little bit stickier if you change your mind. Part of your purchase
agreement should include several different contingencies which are there
to protect you as the buyer and provide potential exits out of the contract if
you may need them. Some examples of common contingencies are
inspections. If something comes up upon your inspection that you can't live with,
that you're very concerned about, and that you and the seller cannot come to
terms with on how that is going to be dealt with, that provides you with an
exit out of the contract where you can legally leave the contract and have the
earnest money returned to you. Some other common contingencies in
purchase agreements are financing. If your financing falls through that
provides another exit for you to leave the contract and keep your earnest money.
As you work your way through your contingencies and do your due diligence
of investigations eventually you have to release those contingencies, in writing.
Once a contingency is released it's like that exit door is shut. That is no longer
an option for you. Eventually you will reach a point in the contract where all
of those exit doors are shut and you're just waiting for closing. So, what happens
if something changes? You freak out and you get cold feet. Your circumstances
change. Maybe you got a job promotion and you're leaving the area. Maybe you
and your spouse are having problems and you don't think that buying a house
together at that time is a good idea. There's many different reasons why
things like this happen. People sometimes do change their minds. So, then what? Well,
chances are likely that the seller is going to be quite aggravated. I'm sure
you can understand why. You've essentially asked them to take their
house off the market and put all their eggs in your proverbial basket.
At the very least, you should expect the seller to keep your earnest money,
however much that might be. It could get worse than just them keeping your
earnest money. You should know that you could potentially be sued for specific
performance or failure to perform.
If you're sued for specific performance a court could order you to purchase the
property. Another outcome is that you may be sued for failure to perform, in which
case you could be sued for damages. The damages go beyond what you might think
they include. Those damages could include things like the difference between the
purchase price that you agreed on, and whatever the future buyer offers. If there's
a difference between those two prices, the seller may ask you to make up the
difference. The seller may also ask you to pay for the carrying costs until the
house is sold a second time around. Those carrying costs include things like
mortgage payments, utilities, yard care... all of the things that it takes
to keep the house running during that time until it is sold again. You might
also have to foot the bill for the seller's legal expenses. It is not
inexpensive to get out of a purchase agreement, and it can go far beyond just
losing your earnest money. If you find yourself in the situation where you
think that you need to exit your purchase agreement I highly, highly
recommend that you speak openly about your concerns with your Realtor®. Do not
keep your Realtor® in the dark. The more open the communication the more likely
it is to go smoothly. I also can't stress this enough, but you need to speak to a
real estate attorney. Talk to an attorney who is going to be able to guide you
through the process and help you find an exit with the least amount of financial
and legal ramifications for your case. I hope you found this video helpful and I
hope that you don't ever find yourself in this situation, but if life has taught
me anything it has taught me that nothing is predictable. We don't always
know how things are going to turn out. As always, I put out videos every Friday, if
not more often, and I'd love to have you join me. They focus on all things real
estate, feature stories about the greater Iowa City area, and easy do-it-yourself
projects. I'll catch you next time.