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sahargen · Joined: 25 Feb 2008 Posts: 1 1.80 Dollars($)

Hello, I was wondering what a person has to do to back out of a loan before closing. We put earnest money down and signed papers, but do not clos until next month. I doubt we will back out but some things have come up and just wanted to know where I stood.
Thanks, Scott

livinginnky · Posted: Mon Feb 25, 2008 2:19 pm Post subject:

What things have come up?

If you mean backing out of the purchase contract... then it depends on what stipulations are in the contract itself. You are never bound to a mortgage until closing, not a second sooner. However you do have an obligation to a purchase contract depending on the situation.

Please clarify exactly what it is that has changed to make you want out...and I will try to help you from there.

jameshogg

Yes Eric, he's not bound until the loan closing occurs.

Well Sahargen, you may read through the previous discussions on backing out prior to closing at:

http://www.mortgagefit.com/know-how/backout-beforeclosing.html
http://www.mortgagefit.com/know-how/preclosingbackout.html

Thanks

lisascherzer · Joined: 04 Jan 2008 Posts: 755 1.12 Dollars($)

Hi Scott,

Was it something that changed on your approval with the lender? If so you can use that to back out of the contract. If not, there are usually enough stipulations in the contract to get your earnest money back if you decide to back out.

gmakerley · Posted: Tue Feb 26, 2008 8:08 am Post subject:

you may face the loss of your earnest money deposit. if you have engaged legal counsel in connection with the purchase, you may be billed for the work done. if you have been working with a realtor, you may be billed for services as well.

my rationale for all of the above is a deal that fell through last summer. my borrowers (immature first-timers) backed out 4 days prior to the scheduled closing date. obviously, we loan officers suffer and cannot bill for services rendered. their attorney and realtor both planned (don't know if they followed through) to bill them for their services. i honestly don't know if they forfeited the earnest money, but that was, of course, possible per the contract.

amazingly enough, the property in question popped up again with a new borrower for me in the fall. so even though i lost the deal with my original borrowers, i ended up closing a loan on that house with different borrowers in december.

bottom line: if you back out of your deal, be aware of the possible consequences.

Posted: Tue Feb 26, 2008 9:18 am Post subject:

Hi everybody, Thanks for the replies!
The reason for this post is kinda complicated. We aren't having any problems with the lender. The problem is a combination of cold feet by me and we are having a few minor issues with the sellers. I don't want to get into all the details on here but I appreciate the feedback. I was just looking to figure out my options...I'm 98% sure that we will go through with the sell...but there is that 2%..... Thanks again, Scott

gmakerley · Posted: Tue Feb 26, 2008 9:20 am Post subject:

glad to help, scott.

and that is precisely what the intent of this forum is, anyway.

livinginnky · Posted: Tue Feb 26, 2008 10:37 am Post subject:

If it is cold feet.... that is not a reason that the law protects.

If the seller has misled you or you have a contingency for the inspection and the inspection was bad... then you have a way out.

But again if you have a purchase contract and you have no legitimate reason to back out besides..."We changed our minds" ... be prepared to lose your earnest money at minimum (as stated above). The sellers could force you to purchase it (very unlikely I would assume).

What it comes down to is this...

When you have an accepted purchase contract.... the seller can no longer market or accept contracts from anyone else... so while you are "deciding" they could be selling to someone else. Since you have a contract the "decision" has already been made... the house is yours if it closes.

So you see it isn't like going shopping or buying a car... if you tell the car dealer you want to think about it and someone else comes in... they sell the car to them... in real estate the seller can't just change the deal and sell to the new buyer... they have to wait for you.

Let me know if you have any questions. P.S. I am not trying to give you a lecture although that is what it is. You have an obligation to the seller and vice versa them to you.

gmakerley · Posted: Tue Feb 26, 2008 12:04 pm Post subject:

eric, plain speaking is what is needed in life in 2008. we have all been coddled, and people are afraid to confront issues on a continuing basis. this has caused an attitude of entitlement with many people. as soon as someone steps out and decides to buy a home, it seems, that home should be 3000 square feet with 3 or 4 bedrooms, 2 baths or more, 3-car garage, etc.

"starter" homes are now seen as decrepit and meant only for the downtrodden, it seems. even the normal first-time homebuyer who has little, if any, money and (perhaps) challenges on credit seems to think there is an entitlement to 100% financing at the lowest rate ever offered.

thank you for your frankness and not-so-stern lecture here. it is so necessary these days.

Guest

i was all ready to but this house. we agreed on a 12pm closing. then the seller said they couldn't be out on time. this made me mad because they have known for two months. then the day before closing the seller said they didn't have enough for closing. this infuriated me. so i cancelled the moving extended my apartment lease changed back my address. then later that night i found out her agent was willing to lend her the money. by this point i had enough. i don't want to go through with it now. but her agent has informed ne that if i don't go through with it i could face legal issues

gmakerley · Posted: Fri May 01, 2009 6:59 am Post subject:

i understand your frustration with this process. unfortunately, in the last year or two we've seen this scenario pop up a lot. sellers seem to forget they owe a certain amount, and they then either forget to notify or simply neglect to notify their agents, their lawyers, etc.

if this is a home that you really wanted, i'd suggest you reconsider backing out. speak with your lawyer, to see what penalties you might incur at this time by doing that, also. you don't need to lose money in this process if you can help it, but of course your piece of mind and happiness is paramount.

Guest

Seller backed out after we signed her counteroffer on a property. Is this legal. She signed we signed we were set to go. I knew purhcasing a home would be difficult but man has it been a ride!

gmakerley · Posted: Mon Jun 01, 2009 6:40 am Post subject:

christina, have you engaged an attorney to assist you yet? you may want to discuss this with one in any event.

Guest

Yes we had the attorneys from century 21 speak to the lady and thank goodness it has all been solved. I guess aparently after she counteroffered with us a friend of hers offered to purchase her home and legally she cant do that - is what we were told... thank you for your response!

gmakerley · Posted: Mon Jun 01, 2009 10:54 am Post subject:

thank you for reporting back to us, christina. your experience may very well help someone else in a similar situation, and that's, of course, what we hope for with all of the information sent back and forth in this community.

i'm happy to know the situation got settled in your favor.

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Backing out b4 closing?