We’ve all been through that dreaded “buyers remorse” before… perhaps with a shirt you later realized doesn’t fit so well, or a gym membership you realize isn’t getting used anymore, and so on. Although it’s annoying and we may make a mental note to not leave the store before trying that shirt on, or swearing to sign a month to month membership next time, it can be much worse in some cases!
So what happens when your “buyers remorse” is regarding a house you are about to move into worth hundreds of thousands, possibly millions of dollars?!
While the obvious answer is to be absolutely sure you want to purchase the property, there can be many factors involved and things that change once you have waived your conditions and you become fully responsible for your end of the deal. When you enter into a purchase contract you are agreeing to certain contractual obligations which you can’t unilaterally walk away from without consequences. Although contract law is very fact dependent and requires a full and complete understanding of all the factors involved, generally speaking there are 3 options available to you.
Negotiate Your Way Out
As the buyers, you could approach the sellers and see if they can negotiate a termination to the contract. You may wish to offer the deposit to the sellers as consideration for the seller agreeing to allow the you out of your contractual obligations to purchase the property.If you are taking this approach you would want to ensure that, at a minimum, the sellers provide a signed Release of Liability which would outline that the sellers can’t sue you later for any damages as a result of the contract being terminated (for instance, if they sold the property later for less than what the buyers had offered to pay). It can be worthwhile to have a Realtor assist with this negotiation, as Realtors will generally have a bit of a feel for where the other party is coming from, and what they could be open to with respect to resolution.
From a seller’s perspective, this option is the least appealing (especially if that seller has entered a contract to purchase a home, and requires the sale proceeds to close that purchase transaction).
Negotiate Terms To Look For A New Buyer
You could approach the sellers, and see if they can negotiate with the sellers to have the them continue to market their property in the hopes that a new third party will come along before the closing date and make an offer to purchase the real property at terms at least as good as the current deal. If they find a new buyer, then the current buyers and the sellers would then terminate their contract, release each other from liability, and could walk away from each other, allowing the seller to deal with that new buyer.For this option to work, the sellers would likely require a written agreement to be in place in which the buyer irrevocably agrees to terminate the contract if a new deal is found. The seller would need to protect themselves from that case where they find a new buyer, but then the current buyer changes their mind and wants to close the transaction. Likely, the seller would also want to think about making it a condition of their new buyer’s contract that the old buyer goes ahead and terminates the current transaction.If the sellers don’t find a new buyer, then you would need to be ready to close their end of the deal in time for the closing date.
This option could be marginally more appealing to the sellers, but in this case you are essentially asking the sellers to do a lot more work to find a new buyer, where the outcome for the sellers could be the same. In other words, you would likely have to “sweeten” this deal with some additional consideration (such as allowing the sellers to keep the deposit if they find a new buyer).
Breach The Contract And Fail To Close
I’ll preface this option by saying that this is not an option I would advise, but nevertheless it does remain an option. If you fail to perform your obligations under the purchase agreement, you are liable to the sellers for any damages suffered by the sellers as a result of the breach of the contract, which damages can be quite large. Sellers would typically keep the deposit (but of course, it depends what the contract says about this), and then would also likely sue the buyer for their damages.Damages could include the difference between what you promised to pay, and what the sellers actually end up being able to sell the home for, any legal costs incurred (which is on a solicitor-client basis in most real estate contracts), and if the sellers were relying on their sale proceeds for the purchase of a new home, and ultimately end up breaching a purchase contract because of not having those sale proceeds, there could be additional and unforeseen damages that mount quickly.
Secret Option – Do Nothing
You might not think of this as being one of your options, however doing nothing and continuing through with the contract can be a good one to consider. This means that you would go ahead and close your end of the transaction, and then would have the option to go ahead and try and list the property to sell it to a new person (once you are the owner of the property). While this would result in you paying closing costs to purchase the home, taking on those costs to carry the property until it sells, and possibly a pre-payment penalty to the lender if the home is sold right away, this can be a good option.This option doesn’t require any breaches of contracts, and doesn’t open yourself up to liability to the seller. With this option, it’s a good idea to have a conversation with a Realtor as to what kind of market value would be at play for the property in the months following the closing date. This would allow you to look at balancing those costs mentioned above with the potential value of the home after close. Even if you take a loss with taking this “do nothing” option, that loss could be much less than the damages you could be liable for to the seller if you were to breach the contract.
This content is provided for general information purposes only and does not constitute legal advice nor does it constitute an opinion of any kind.*