Backing out of a contract (contingencies, clause, negotiating, agent)

[Jen526]

After a fairly long house-hunt, I recently put an offer on a place that was higher than my original target, but so perfect for me needs in most ways that I thought I could stomach a bit of scrimping to make it work.

I was approved for the loan with no problems. We are currently in the inspection phase, and there were some issues (with a secondary roof inspector coming today), but nothing that would be "show-stopping" under normal circumstances.

Unrelated to the house purchase, I had an annual meeting with my retirement planner this week, and when he put down some numbers on that end that were... not what I had expected.

I am 40 years old, and single with no expectation of ever having a significant other to increase family income. My finance guy is recommending putting more into my retirement funds, and suddenly, that loan that involved a bit of scrimping to pay off is not looking as feasible as it did. I am near the top of my pay scale, and can't expect to "grow into" my house payments the way I did with my first home.

While we were drawing up the offer, my realtor was very reassuring that the buyer can pretty much back out at any time before closing, but knowing how these things work, I'm expecting some pushback when I actually take her up on that.

Anyway, my question: Is "getting cold feet about the price" an allowable reason to back out at this point? I know it's crappy of me, but I want to get a feel for how much pushback to expect, and who has the ethical and/or legal high ground...

[keeshonder]

Generally, the answer is a resounding no! Of course that depends upon how your contract is written. In Georgia we set up a due diligence period in which the buyer can back out for any reason, but is also the time frame in which all inspections and other "due diligence" actions are to take place. It is usually about 10 days. After that, the buyer only has failure to meet certain contingencies, such as financing, to allow a back out without loss of earnest money. There is a good chance that, again, depending upon your contract, you could forfeit your earnest money, and, although not as likely, the seller could sue for performance. Next time you should have all those talks, with financial counselors, etc. before entering into a purchase agreement.

This is not legal advice and to find out for sure you should check with your attorney for your options in your state.

[2bindenver]

What percentage of your income is this new house payment?

"Perfect" houses don't come along as often as you would think. And after 30 years it would be paid off and add to your retirement.

[Zyngawf]

It was irresponsible for your Realtor to tell you you could back out at anytime before closing. What keeshonder told you is correct, but I don't think a seller would sign a contract where a buyer had no risk if they back out. The whole purpose of putting down earnest in the first place is to protect the seller by making it a risk for the buyer to just walk away.

[jbiggs]

Originally Posted by Jen526

After a fairly long house-hunt, I recently put an offer on a place that was higher than my original target, but so perfect for me needs in most ways that I thought I could stomach a bit of scrimping to make it work.

I was approved for the loan with no problems. We are currently in the inspection phase, and there were some issues (with a secondary roof inspector coming today), but nothing that would be "show-stopping" under normal circumstances.

Unrelated to the house purchase, I had an annual meeting with my retirement planner this week, and when he put down some numbers on that end that were... not what I had expected.

I am 40 years old, and single with no expectation of ever having a significant other to increase family income. My finance guy is recommending putting more into my retirement funds, and suddenly, that loan that involved a bit of scrimping to pay off is not looking as feasible as it did. I am near the top of my pay scale, and can't expect to "grow into" my house payments the way I did with my first home.

While we were drawing up the offer, my realtor was very reassuring that the buyer can pretty much back out at any time before closing, but knowing how these things work, I'm expecting some pushback when I actually take her up on that.

Anyway, my question: Is "getting cold feet about the price" an allowable reason to back out at this point? I know it's crappy of me, but I want to get a feel for how much pushback to expect, and who has the ethical and/or legal high ground...

You would have to read your contract about what reasons you are allowed to back out for. If you have a clause to back out for any reason during the inspection contingency then you should seriously consider it. It is not crappy of you at all and you should NEVER feel that way in a business deal which is all this is. If you feel uncomfortable with the contract wording you should quickly speak with an Attorney. Your agent might well be telling you the truth but potentially only part of it. I don't know any sane seller who would agree to allowing you to back out at any time prior to closing without forcing heavy penalties on you.

You obviously have a question on your future ability to possibly keep the home and have indicated that you are stretching your resources now. If your agent did not step up to the plate and counsel you heavily about stretching your budget then do not expect them to perform properly at any time. That would include providing you advice that you can back out at any time before closing without incurring large penalties.

[AK-Cathy]

No. Cold feet about your offer is not a legitimate reason to back out of a binding contract in the business world. While it's unfortunate, I don't agree that the feelings that you are experiencing are all that unusual. What you are feeling right now is called buyer's remorse, turned to slight panic. It happens all the time with big purchases, especially with first timers. Keeshonder is correct in general about the repercussions of backing out of a contract without cause, worry or regret of course is not among them.

If you were approved for a loan without a problem in this tight credit market, your financial numbers are likely good to very good. If you didn't do anything crazy like borrow the down payment and if your monthly mortgage, insurance and tax load will be roughly equal to comparable rent in the area and if your job is rock solid, you will likely be fine.

If you made an impulsive mistake that will ruin your life, then drop out. You will lose your deposit and inspection fees, there may also be fees owed to the bank for services already rendered towards this sale that the sellers normally pay and finally you run the risk of a performance lawsuit. Back in the seller's market days, those suits were rare to non-existent. I would imagine if this house has been sitting out there on the market for a long time or if the sellers lost other good buyers as a result of negotiating in good faith with you, the risk could be substantial.

Though I normally advise everyone to buy a house that is well beneath what they are told that they can "afford", you are already neck deep in the sale. Is it possible to get a roommate at least at first to help out with making "rent" until you are more comfortable with the idea of home ownership?

Best of luck to you, whatever you decide. Another cautionary tale on CD...

[chet everett]

...WIMPY...

Yes, yes I am sure that what others would call "prudent" might also apply, but WTF man, you seem to have either "put the cart before the horse" in terms of getting one financial advisor's opinion on your broader finances AFTER you put in an offer OR you are KIDDING YOURSELF about what sorts of expenses you have relative to your income.

For cripes sake you have at least 27 LONG years ahead of yourself before retirement. What kind of loser mindset do you have that you have peaked in earnings?!?

For the love of it all you are SINGLE! You do not mention needing to support ANYONE buy yourself. It ain't like you have any major expenses ahead of you -- college or other education expenses, weddings, gifts to newlyweds, grandkids, etc...

Unless there is some major category of expenses in your life that you have left off I would think you are exactly the kind of buyer that ought to be very comfortable about "stretching" a bit to own a home that is PERFECT for you. What the else are you going to do to have SOME THING to work for???

BUCK UP! Put on your thinking cap and your big boy pants and make decisions in the rational world of that your lender has EASILY approved your loan, you will likely NOT have much difficultly considering any extra funds put toward a PERFECT home actually harming you nearly THREE DECADE LONG road to retirement and you would LOSE A PILE OF DOUGH for the earnest money and other expenses you have already incurred.

If you were doing something CRAZY like getting into some funky mortgage, or even a high rate mortgage, or completely ignoring 401k or heaven-forbid tapping out existing retirement I would say a big WHOA BOY was in order, but merely have some COMPLETELY NORMAL FEARS about readjusting to a higher outlay is what your are expericing...

[manderly6]

While saving for retirement is important, it's not more important that enjoying your life before you get there.

[Dressy]

If you are now in the inspection period, then your contract is contingent on the inspection. (there would be otherwise no any point in inspections, you are obviously not doing them for fun while being under contract).
That means you can walk away if you are not happy with what inspector told you. If there are roof problems simply require the seller pay to you for the roof repair, fix the roof, replace the roof, whatever. If they disagree, you will legitimately walk away and get your deposit back. Check your contract though.
But think twice. If you like the house and it is a good investment - get it. You may never find a perfect place like that later and regret it big time. I did not quite get how it can badly affect your retirement. The interest rate for buying houses is still good now. You can sell the house later too. Buying a house - is investing in retirement. Check what interest you are getting on your retirement savings right now. It is probably a miserable amount. And inflation kills it all. The only good thing about 401K is that it is tax free. So,
I would check if you are eligible for any home buyers tax credit.

[Dressy]

Gosh, however it is really disturbing for me to know how people are unable to read whatever they have sign even after they signed - they are still unwilling to read their contracts even having a copy at their disposal... What is going on with you, guys?