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A friend of mine accepted an offer on the house she's selling and found another one she wanted to buy and got into a contract with that too. Now her buyer wants to back out of buying her house for no reason, and she thinks they're going to have to take legal action to make her respect the contract, and in the meantime they'll lose out on the house they were going to buy instead? How is something like this supposed to work? I'm curious not only for her sake, but someday I will have to "move up" from this house and buy and sell at the same time, and it sounds hard! What can you all tell me about it?
When you sell a home and make an offer on another house your offer should have a "Contingency" addendum that says if your 1st home does not close you can get out of this contract on home #2 and get your earnest money back.
Over the last 2 days I have 3 closings where buyer A bought seller B's home. With Seller B we had a contract with Seller C that was contingent on the 1st house closing. We closed the 1st house yesterday, received the funds last night and closed the 2nd house this afternoon.
It's very risky for a seller to take a contingency contract on their home. There is a certain point you accept it, once certain events have been passed such as inspections on the buyers home they are trying to sell. You would never accept a contengent contract from a Buyer who's not even put his home on the market or have it under contract.
Contingencies can be confusing and risky.
We built a home this last winter. We 1st sold our big expensive home, moved into an apartment for 7 months while we built a new down sized home. That was much safer for us even though it was more work and we did it without having to do a contingency.
I think Rakin is honest that it COULD be risky for a seller to accept a contingent contract, but NOT "very risky" and certainly not when the buyer has supplied evidence that they have everything "in the pipeline".
The advice to the OP is simple -- if you want to be insulated from such a risk you COULD do as Rakin did and "move twice" OR have a very specific set of standards the MUST be met by the buyer before you accept a contingent offer from them to buy your house AND you ought to be at least as cautious in making an offer on house so that you do not jump the gun before you KNOW you place is sold.
Personally I have been involved in deal that has as many as SIX sellers/ buyers in a "chain of contigencies" where two couple were both selling their previous "single pads" to others and combining household to result in a double move-up set of dominoes. We all needed diagrams to make sure we showed up at the right closing...
I am guessing this friend of mine did have such a contingency on her contract to buy a different home, but is afraid she's going to have to use it and get out of that contract if this other lady buying her first home walks away and they have to chase her down and mess with all that, she won't be able to buy this other house "in time" and is very disappointed to lose it because they looked for a long time to find a place that met all their criteria (she runs an in-home daycare and this house was a good layout for that and in the right location, etc.). I hope they can get her buyer to wake up and stick with the contract she signed without having to make a big mess of things.
...Now her buyer wants to back out of buying her house for no reason, and she thinks they're going to have to take legal action to make her respect the contract, ...
Was the buyer of her house out of all contingencies in the contract? Past inspection and finance contingencies? If so, probably your friend's only recourse will be to keep the earnest money.
A friend of mine accepted an offer on the house she's selling and found another one she wanted to buy and got into a contract with that too. Now her buyer wants to back out of buying her house for no reason, and she thinks they're going to have to take legal action to make her respect the contract, and in the meantime they'll lose out on the house they were going to buy instead? How is something like this supposed to work? I'm curious not only for her sake, but someday I will have to "move up" from this house and buy and sell at the same time, and it sounds hard! What can you all tell me about it?
You know many states have clauses where the seller agrees that if the buyer backs out their only recourse is earnest money. While your friend may want to spend $40,000 in legal fees to pursue this, really taking the earnest money is the often the smartest choice.
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