What are my options on getting out of a purchase agreement
My wife and I have a question. We are about two weeks away from closing/buying a house in MN. We are expecting our first child and have had a change of heart and would like to move closer to my family in FL. We really want to get out of the purchase of this home, but dont know if there is any legal ramifications in doing so? My realtor told me that the seller would probably take us to court and that our credit would be affected if we were to back out now. Is there any legal issues in the purchase agreement, done through Coldwell Banker that anyone knows about? I know I will probably loose my earnest money, but dont want to get into a huge legal battle and damage my credit. Any feedback would be much appreciated.
Thanks so much,
Jim and Alana Scalese
Hi kelti57, Welcome
I think your best bet would be to take your agreement to an Attorney to look over...
or...check out the Law and Legal forum for possible assistance.
Hope this helps
Clif
kelti57,
Glad to meet you.
I see this Realtor had your best interests at heart by telling you this.
I am at a complete loss to figure out how this can effect your credit since you do not owe any money, as you have not done a final closing and signed any loan documents.
"Deals fall out of escrow for various reasons all the time either the seller backs out or the buyer does", someone is going to sue you and your wife for wanting to move closer to your family?
I would immediately contact the Board of Realtors file a compaint and explain the situation as described by your Realtor. Tell this Realtor you are going to do this, do not back down stand up to this person, see what they have to say when you tell them this.
I would say this Realtor is hungry and doesn't want to miss your paycheck to them so they can find thier next meal.
Not trying to give legal advice here but something does not seem right to me.
Do not discount Pbodys advice in contacting an Attorney, but I would try the Board of Realtors first, also cc: your State Attorney General Office as Realtor's are State Licensed. They have a fudiciary responsibility to treat you with your best interests at heart and not give legal advice like you will get sued or have your credit ruined.
This gets me hot, the one thing I teach is do not lie when we are doing deals, someone may find out about the lie and take action like I have recommended to you.
Welcome on board this board, I think you will find that you have every right to cancel this deal without getting in trouble. You will in all likelyhood lose your deposit.
John $Cash$ Locke
Sorry to hear about your situation - sounds tough. It is not likely to be as bad as your Real Estate agent makes it sound remember that it is his/her paycheck that is dependent on him/her telling you that you HAVE to go to settlement. And you have come to the right place for some starter advice. The people here will help point you in the right direction.
First of all you have to look over your contract very very closely. I am not dispensing legal advice either but usually there is a contingency for financing. This can be a convenient way to scuttle a deal legally. Also there ususally is a contingency for a home inspection and you can cancel the deal for just about any finding in that. (Including the fact that it is thousands of miles away from where you wnat it to be.) There are certainly others and usually it does not involve losing your earnest money (at least if your agent was protecting you as he/she should have been) and certainly not effect your credit at all. All of the possiblilities should be addressed in the contract so read it and if you find something that looks like it might be in your favor ask a specific question here.
_________________
Great Luck,
KP
Emerald Investment Real Estate
eiremclaughlin@comcast.net
[ Edited by KP on Date 05/16/2003 ][ Edited by KP on Date 05/16/2003 ]
I disagree slightly,
Thr realtor may[must be] saying such because she does not know any better I say call the "broker" the agents boss and explain what you want to do. They can present this problem to the seller and see if they will let you out. If not they will probably take your earnest money They could sue for failure to perform but that would be quite expensive and may be satisfied to keep your money and go get another buyer.
I wouldn't make a big deal by reporting this incident to the board or state without speaking to the broker. I'll bet you can work it out but plan on losing your earnest money and of course you will need the advise of an attorney.
KP,
Excellent advice, you are correct there are many ways to break the contract without litigation.
My point being, this agent is dwelling on the naivety of Jim & Alana by threatening them. I would have rather seen some ethical behavior on the agents part.
As we in the creative real estate industry should police ourselves from the bad seeds, Realtors and their agents should also be held to higher standards because of the trust placed in them by their clients.
I know Lyn in her post would have a tendency to defend the agent, this is a good thing on her part, but I on the other hand will not tolerate someone needing a payday so bad they would not assist their client by helping them.
Because of your post you are someone I would recommend doing business with, it doesn't sound like you need a payday so bad you would have handled this matter in the same way this agent did.
What I really wanted to say was something about this agent should be boiled in oil, but I don't think this is allowed anymore.
John $Cash$ Locke
Well, let's see if I can actually help.
I'm a MN Realtor, so I'd better be careful what I say. You can email me if you'd like and by even knowing who the agent is I may be able to shed some light.
FIRST, MN is a VERY consumer-protective state. Our standard purchase agreement has just about every out you could imagine for a Buyer. Bottom line is, I'd need to know if all your contingencies were removed already. Most important one is on the standard financing addendum - what is checked... box 1 or box 2? If box 1 is checked, you can wiggle your way out.
Anyway, here's what it comes down to, and I HOPE the Seller isn't listed with my company for me to be giving this advice so I'm not violating agency, but since I don't know, I guess I'm not doing anything intentionally wrong...
Bottom line, if you want out, you'll most likely get out. In MN, normally, until BOTH parties sign a cancellation of purchase agreement, the earnest money can't be released, and neither can the property. In other words, if you sign a cancellation saying you get the earnest money back, and the Seller won't sign it that way, they CAN'T sell their property to anyone else until they sign the cancellation. If they are even the least bit motivated to sell, they will probably sign the cancellation and move on. Now, that will depend, of course, on how much earnest money you gave them and how far into the transaction you were / when the closing was supposed to take place. If they really wanted to be stinkers, they could refuse to sign the cancellation and sit on your earnest money, but they can't keep it until you sign that cancellation giving it to them. So, just refuse to sign the cancellation, or... split the earnest money or give it up, to be fair, if circumstances call for it. I suppose they could come after you for damages, but they have to show damages, so if the closing was 2 months from now I doubt they'd win. On the other hand, if their moving truck is in the yard and you didn't show up for closing, you might have problems.
There's ALWAYS a way out of purchase agreements, especially here in MN. I don't know if you had your own agent, or if they are the listing agent, but do what is best for you and know your rights - don't be bullied. And if it WAS your own agent telling you that, God help them if you decide to pursue anything with the Board of Realtors or Dept of Commerce, because they have a legal obligation to represent YOU and your best interests, no matter what. Telling you what sounded like a threat isn't looking out for your best interests and is a violation of your contract with them. I'd bring that up if I were you. Even if they were representing both parties (dual agency), they shouldn't be making statements like that. They have to be neutral.
Good luck
Ok, now I see I'm in trouble, I jumped on too quick before reading all the way through... you're dealing with my company
Anyway, like I said, I still don't know if this agent is YOUR agent or the Seller's agent, or if both work for the same company - that makes a huge difference in how things should be handled.
Call the agent's manager at their office, and if that doesn't work, call Al Iverson at corporate. He will help you.
I know MY manager looks at these situations by trying to do what is best for everyone - get the place back on the market. You really can't MAKE someone buy a house, and there's no sense dragging it out; accept it, and move on. I've had one poor seller that has had 4 deals fall apart in the last 5 months, and he hasn't kept a penny of earnest money. Lucky for me, he's still smiling!
As for what's in it for the agent, they don't get anything if your earnest money is kept (it's not like THEY get it) - I'm guessing you're either dealing with the listing agent or a new agent. Go higher up and you'll get it taken care of. CBB is a great company and we do things by the book - unfortunately, some agents need to be taught what that is by their manager.
Good luck!
AngelaLarson,
I happen to know you are a blonde, however, this does not always apply, in your case you are a very smart young lady.
Thanks for this advice, you are one of the few agents I would do business with when I say " there are a few good ones around."
You did nothing wrong you helped someone who needs help.
John $Cash$ Locke
To all that have applied to my previous post on if my wife and I can get out of our purchase agreement. Thanks for all your advise. We have talked now to countless people and everyone seems to agree that we should not have a problem getting out of the agreement. Today I actually called my agent back and used alot of the advise you all gave me and told him we wanted out of the purchase. After a little bit of venting on my part, the agent changed his tune and said he was going to do his best to get my earnest money back. Well, unfortunately it looks like the sellers are going to want to try and pursue something in court. I got a letter from the seller, who happens to be a real estate attorney and she wants to sue me for "specific performance of the purchase agreement" Of course she went on to threaten me with "so such a suit on my part costs me nothing but time, while I on the other hand, will incur thousands of dollars in attorney's fees." Isnt that nice!! I would like to know if anyone knows what she might try and get or what am I looking at if she actually tries to sue? Again any of your responses would be appreciated- it really helps to hear all your valuable information.
Thanks,
Jim and Alana
Ah, John, you continue to flatter me
I'm worried about getting in trouble with the Board and our Agency garbage more than doing the wrong thing. I take all that stuff VERY seriously and try to be a very ethical agent (you KNOW my struggle with Agent vs. Investor... not that investors aren't ethical, but it's DIFFERENT).
Thanks for your kind words and guess what... our big bird is wide open Thurs afternoon so I will be there with bells on Friday am (blonde hair and all!)
kelti57:
As one poster suggested, contact your attorney. While the other posters are well-meaning, they failed to inform you that determining whether you can (legally) get out of the contract is a legal issue that is best addressed by an attorney. Some contingencies that you think you might have, may, in fact, have been impliedly waived by your actions.
While MN is a consumer friendly state, that does not mean that any person that wants out of a real estate contract can get out of it without any legal recourse. (Besides, consumer law does not apply to most real estate transactions or contracts, so the fact that MN may be a "consumer friendly" state is irrelevant).
In addition, the fact that you do not sign a cancellation agreement does not mean that the seller cannot sell the house to anyone else. If you are deemed to be in material breach of your contract, the seller can still sue you AND sell the house to anyone else WITHOUT GETTING YOUR SIGNATURE ON THE CANCELLATION AGREEMENT.
The bottom line is to get an attorney to review the contract immediately. It might be well worth an hour or two of his or her time, especially if it helps you prevent being sued later. Often, sellers will cancel the contract if they get a letter from an attorney that informs them their client (the buyer) is legally cancelling the agreement and expects prompt return of the escrow/earnest money.
Taxjunkie
(By the way, I am not a real estate agent, but I am an attorney and am licensed to practice law in MN. The posters are well intentioned, but following some of the advice above without getting some legal advice may cost you more money in the long run).[ Edited by taxjunkie on Date 05/26/2003 ]
taxjunkie,
We all appreciate your being here to set the record straight regarding legal questions at least I do.
So in todays society a person should have an Attorney review the contracts before they purchase or sell a house using a Realtor. My point here since it is a legal binding contract whose responsibilty is it to explain to the buyer or seller as a matter of fact what they are really signing.
What the legal ramifications are if either party defaults, etc.
No trick question, just would like your point of view.
John $Cash$ Locke
to John Locke
John I know you are a moderater, did I get a couple of posts removed?
LynLinz,
Looks like we both did only I did not do it.
It was probably that friendly exchange we were having and someone did not understand the message there.
I replied about my dry sense of humor and how I enjoyed your posts, basically it is ok to disagree (which we did) as far as I can see, guess some other moderator did not see it that way.
If I did remove something of yours I would inform you, wish someone gave me the same courtesy.
John $Cash$ Locke
Thanks John
I was just coming back to erase it and call it a day
I love your posts and the whole site
look forward to your seminar in Florida
JL,
You stated "So in todays society a person should have an Attorney review the contracts before they purchase or sell a house using a Realtor. My point here since it is a legal binding contract whose responsibilty is it to explain to the buyer or seller as a matter of fact what they are really signing."
What the legal ramifications are if either party defaults, etc."
A:
Good question, as many people believe that because they use an agent, a lawyer is unnecessary. Assuming everything goes smooth, usually a buyer or seller will not need an attorney for the typical residential sale. (real estate investors that buy and sell often is a different story ... )
A real estate agent or broker's job is to market, sell, negotiate and write up a sale for real estate. If the agent or broker is a buyer's broker, then that agent or broker is suppose to negotiate the best deal they can for the buyer. But rarely can a agent or broker be held liable for not putting in proper legal clauses to protect the buyer.
Here, the buyer should have had a "liquidated damages clause" in the contract. I have found most standard real estate contracts do not contain such a clause (most realtor's standard form do not contain such a clause because they do not want you to back out of the deal and only be liable for a small amount).
A liquidated damages clause basically says that if the buyer does not complete the transaction because of the fault of the buyer, the seller can keep $X dollars (usually the earnest money amount) as total damages from breaching the contract. If the liquidated damages clause also says that specific performance is not a remedy, then the seller cannot make you buy the real estate (specific performance means the non-defaulting party can make the other party perform its obligations under the contract; with real estate that usually means buying or selling the property). It's probably clear to many that the loosing an earnest money deposit is cheap considering the alternative of a suit for specific performance.
Who's responsibility is it for informing the buyer that they should have a liquidated damages clause in their contract? Not the agent or broker (even if it is a buyer's agent or broker). Rather, the buyer's attorney, if they consulted with one (which in this case it appears they did not), should raise that issue.
John, but to answer your question more directly, an agent or broker can tell the buyer that if they do not complete the contract and have fulfilled or waived all of the contingencies they "may" be obligated to purchase the property. Whether they are, in fact, "legally" obligated is an interpretation of law to the facts of the situation which is best handled by an attorney. I have often had clients call me and say that they signed a contract and the other party is threatening to sue and says they are obligated to complete the contract. Often, I have found more than one way to legally break the contract even though all of the contingencies have expired or been waived.
Keltie, although the seller is an attorney and has threatened to sue you by indicating that it would not cost him or her anything to pursue the action in court, that may or may not be a threat the seller is actually willing to carry through on. Remember, the attorney's time is money. It is unlikely that he or she would be willing to spend many hours writing a court brief and filing an action that could go on for years. Even if they do, the court will likely require him or her to show that they attempted to "mitigate" the damages; meaning trying to sell the property (and if it sold for more than your contract, you generally have no damages; but if it sold for less, you might be responsible for the difference). If they win and have represented themselves, most courts will not award them attorneys fees.
Send me a private email and let me know the name of the seller. I may be able to help you out or at least refer you to someone that can help settle this dispute. At the very least, if the seller gets a letter from another attorney, he or she knows they can no longer use idle threats to scare you into something that may not be in your best interests.
Taxjunkie[ Edited by taxjunkie on Date 05/26/2003 ]
i have a similar situation but it is the oppisite i was buying a house in the her thetbronx,ny and we went to contract in june. the seller let us in to appraise the property, but it took some time but all rentals live there. and things were going good and recently he let us in to do a termite report and the the bank that was doing the loan wanted a kitchen removed so he let the appraiser in last week removed the kithen and take the pictures we were supposed to close this tues and he backs out. now i have spent 800 on surveys 600 on appraisals and to boot my mortgage broker did all this work it was not a easy loan. can he do this i feel that he was still honoring the contract as he was letting us in to do things to close on tues. he should be told buy the courts that he has to sell me the property is there a quick way i can put a lien on it.
The key here is a valid contract and a quick lis pendens.
As a realtor, here in Texas. I am pretty much required to give all of the help and advice I can.
However, in any situation like this, it should always be followed by, "but I am not an attorney, that is who should consult with"
Big problem is, most people don't have an attorney and most people aren't willing to pay for one. That is what your seller is counting on.
To the guy in New York. I have a personal friend who is a NY real estate attorney. PM me if you want her name.
Good Luck to you both !
[addsig]
If there was a thread that i had to base my descision on paying my yearly dues, i would pay 5 years in advance based on this one!
Angelalarson or Alarson (one and the same?) AND taxjunkie : You two gave some real practical advaice based on your professions that gave real direction the people with a problem. I am sure they appreciated it. I did!!
[addsig]
Jim and Alana,
Well you have had a lot of advice in this situation already and I must say that some of it makes me cringe. Those who are telling you to go to an attorney for advice are giving you sound advice. Those who are telling you that people get out of contracts all the time are giving you BAD advice.
I would never advise someone to walk from a deal. You put your name on the line and you need to honor it. It is true that deals do fall apart, but there are right reasons why they fall apart and there are wrong reasons why they fall apart.
In your case, if you are qualified to go through with this purchase then for you to walk would be wrong. You put the property under contract, you put down a deposit, you had the seller take their home off of the market, you had your realtor spend time on this, you had the sellers realtor spend time on this. Now let's talk a little further about what could take place.
I'm someone who has bought and sold many homes. I have never just changed my mind and not done a deal, but I have had numerous sellers do what you want to do. It downright makes me angry when someone ties my home up and then just wants out. The party who gets hurt the most in such a situation is the seller. There home is tied up, they are icurring expenses while waiting for you to settle, and then if you don't it usually costs most sellers in the thousands of dollars for a buyer who has walked away.
Now with that being said, I'm not saying that all is lost. If I were the seller I'd be very inclined to help somene who wrote a letter to me explaining their situation, and who was willing to take on the burden of any of the expenses that I may have incurred. I'm not sure I would take the money, but if someone was sympathetic toward what they were doing to me by backing out of the deal, I might have some sympathy toward them.
Your reasons for wanting to get out of the deal are admirable, however they don't give you a legal right to break your contract.
The seller probably does have the right to sue you for specific performance. The likelihood of that happening is slim. You see, if they want to sue you for specific performance, they would be suing you in order to get you to purchase the home as you agreed. This means that they can not sell their home to anyone else while litigating against you. There home would be tied up. If they could resell the home at your risk and expense, it means that they could resell and if they sold it for less you would have to make up any of their losses, but most realtor contracts don't have this verbage in the contracts.
In any event, I've heard many threaten to sue, I've seen none do it.
I'd take the route of pleading with the seller to release you from the deal, and be willing to help cover expenses. Your earnest money is enough.
Not that you should have to, but you need to keep in mind you have had two real estate agents work and waste their time as well if you back out of this.
[addsig]
I don't believe that anyone answered your question about what you might be sued for. The attorney in question said that she would sue for specific performance. This means that she is sueing you to perform something specific. She is sueing you to make you buy the house. I don't believe that any other compensation is due her, but like many have said before, get yourself to a good real estate attorney and have him look over your contract and advise you accordingly. Good Luck!