Author Topic: Canceling a home purchase a few weeks before closing?  (Read 5748 times)

imustachemystash

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Canceling a home purchase a few weeks before closing?
« on: November 22, 2015, 11:19:24 AM »
I am having second thoughts on purchasing a cabin that I want to use as a vacation rental.  The rent should cover the monthly expenses, but it is not guaranteed.  I recently found out there are a lot of break ins in that area since many of the cabins are not always occupied.  It is a really emotional decision since I grew up in the woods and really really miss it (I have to live in the 'burbs because of my husband's job).  I think owning the cabin would delay FI by a year or two. Hmmmm.  It is sort of like canceling a wedding last minute.

Has anyone done this?  If so, what are the costs associated with it.  I know I will lose 1,000 earnest money.

What to do???


GuitarBrian

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Re: Canceling a home purchase a few weeks before closing?
« Reply #1 on: November 22, 2015, 11:32:05 AM »
Not sure if my experience is applicable...

We made an offer on a house, sent the earnest money. Then while waiting for bank approval, cancelled. A month or so later, they sent us a check for the earnest money.

We had assumed it was lost, but you never know.

Eurotexan

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Re: Canceling a home purchase a few weeks before closing?
« Reply #2 on: November 22, 2015, 11:40:14 AM »
If you're unsure about it I would back out. $1K is potentially a lot less than a rental which is costing you money and may be difficult to see (not to mention the fees associated with selling).

Also, as GuitarBrian mentioned, you might even get the $1K back.

James

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Re: Canceling a home purchase a few weeks before closing?
« Reply #3 on: November 22, 2015, 11:51:01 AM »
My biggest financial mistake ever was the purchase of my lake home. I also got cold feet in the weeks after signing the agreement, and wanted to pull out. I will forever regret not pulling out, the loss of $5000 earnest money pales in comparison to the $300k I lost over the next 5 years.

That is what earnest money is for, you should let them know you can no longer go through with the purchase and wish them well, saying you don't expect to get the earnest money back unless they are willing to return it.

I'm not saying buying the cabin is the worst decision, I can't know that, I'm saying you should be sure if you are buying a cabin, so if you can't get sure in the next day or two I would cancel it.

Cathy

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Re: Canceling a home purchase a few weeks before closing?
« Reply #4 on: November 22, 2015, 11:54:20 AM »
OP, assuming you are working with a lawyer on this land purchase, you should ask him or her for an analysis of the potential consequences of breaching any sale contract that you may have signed. This is a very fact-specific question and the answer will depend on the precise terms of any documents you have signed, as well as all of the other relevant facts. There is no general answer to the question of what the consequences will be. However, I will nonetheless post in this thread because I want to clear up a misunderstanding that seems to be present in the earlier replies.

Under Washington state law, if a buyer fails to perform under a contract for the purchase of land, the seller's remedy is not limited to retention of the earnest deposit unless the contract says so or the seller otherwise waived other remedies. "In general, a vendor or purchaser may obtain specific performance of a contract for the sale of realty." Streater v. White, 26 WnApp 430, 433 (WA Ct App 1980). This means that, in general, the Court can order the buyer to close on the sale and purchase the property. However, this is an equitable remedy and it is subject to various defences such as waiver, estoppel, unclean hands, etc. See, e.g., Sheldon v. Hallis, 72 Wn.2d 993, 996 (WA Sup Ct 1967) ("An action for specific performance is a proceeding in equity."). That is one reason why this is a very fact specific question and OP should ask his or her lawyer for advice.
« Last Edit: November 22, 2015, 11:57:20 AM by Cathy »

arebelspy

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Re: Canceling a home purchase a few weeks before closing?
« Reply #5 on: November 22, 2015, 11:55:12 AM »
Likely the contract specified the EMD as the sole recourse for the seller, almost all of them do. It would take a minute to read the contract, and require no lawyer for that.
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James

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Re: Canceling a home purchase a few weeks before closing?
« Reply #6 on: November 22, 2015, 12:18:10 PM »
Likely the contract specified the EMD as the sole recourse for the seller, almost all of them do. It would take a minute to read the contract, and require no lawyer for that.


I agree, no lawyer required to read the contract, and also if using an agent ask them what their understanding of the contract is, and what local president they know of for failure to follow through on an agreement to purchase.


They can always sue, but I think the likelihood of suing is low, and if suing the likelihood of winning is low. But good idea to find out first.

imustachemystash

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Re: Canceling a home purchase a few weeks before closing?
« Reply #7 on: November 23, 2015, 09:22:17 PM »
Thanks for everyone's input.  Today found a vacation rental property manager and she is going to look at my potential property tomorrow to see if it meets her criteria.  If so, she told me it will only be vacant 2-3 days a week and her other cabins have never had a break in because of the steady traffic. If she will rent it for me I think it will be a game changer!  I'll post an update soon.

Letj

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Re: Canceling a home purchase a few weeks before closing?
« Reply #8 on: November 23, 2015, 09:28:50 PM »
I am having second thoughts on purchasing a cabin that I want to use as a vacation rental.  The rent should cover the monthly expenses, but it is not guaranteed.  I recently found out there are a lot of break ins in that area since many of the cabins are not always occupied.  It is a really emotional decision since I grew up in the woods and really really miss it (I have to live in the 'burbs because of my husband's job).  I think owning the cabin would delay FI by a year or two. Hmmmm.  It is sort of like canceling a wedding last minute.

Has anyone done this?  If so, what are the costs associated with it.  I know I will lose 1,000 earnest money.

What to do???

You could forfeit the deposit and also owe the realtor's fee as well as sunk cost such as lawyer's fees, the cost of title work, if already done, etc.

Pancake

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Re: Canceling a home purchase a few weeks before closing?
« Reply #9 on: November 23, 2015, 11:04:16 PM »
If you are still within the inspection phase or any other contingencies then it's easy to get out if you just say it didn't meet your criteria for whatever reason. Otherwise, they may keep you earnest money. Doubtful they'd go after you otherwise because it's expensive and troublesome and they just want to sell, but you never know.

arebelspy

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Re: Canceling a home purchase a few weeks before closing?
« Reply #10 on: November 24, 2015, 01:46:37 AM »

Thanks for everyone's input.  Today found a vacation rental property manager and she is going to look at my potential property tomorrow to see if it meets her criteria.  If so, she told me it will only be vacant 2-3 days a week and her other cabins have never had a break in because of the steady traffic. If she will rent it for me I think it will be a game changer!  I'll post an update soon.

Cool!  Make sure you try to get another opinion. And keep in mind they may be somewhat biased--it makes them money to be managing your property.

Good luck!
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
If you want to know more about me, this Business Insider profile tells the story pretty well.
I (rarely) blog at AdventuringAlong.com. Check out the Now page to see what I'm up to currently.

frugaliknowit

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Re: Canceling a home purchase a few weeks before closing?
« Reply #11 on: November 24, 2015, 09:02:49 AM »
Check with a lawyer.  Is the purchase contingent on securing a mortgage?  If so, you could try sabotaging the loan application...

 

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