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