Home Buying in Mankato>Question Details

louiseksexton, Home Buyer in Mankato, MN

If closing is when you officially get to own the house, can you back out prior to closing?

Asked by louiseksexton, Mankato, MN Mon Mar 4, 2013

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11
The correct is "Yes - BUT". If you wrote an offer and you and the seller came to an agreement, wrote it out, and signed it. Then you have a binding purchase agreement and the terms of cancelation are typically spelled out inside this document. What does your agent have to say about things?

Cameron Piper
Coldwell Banker Burnet
licensed MN Real Estate Broker
612-839-4202
Web Reference: http://www.CamPiper.com
1 vote Thank Flag Link Mon Mar 4, 2013
Louiseksexton,
Thanks for the reply. I suspected this may be the case and I want to assure you that the feeling is normal and actually healthy.
Chances are you have put a lot of time, energy and thought into buying a house. You put more into searching for the perfect place and now it's all finally coming together. This process is the death of one process you've been doing for a while, the house hunt; but the birth of another, home ownership.
We grieve when something changes and that's okay. Trust that the time and energy you put into your process was well thought out.
I would encourage you to focus on the excitement of home ownership, of having time in your own place to decorate as you see fit, to entertain in and enjoy for years to come. If this is where you place your thoughts, the anxiety of making the major decision will decrease.
Let me put one cautionary word in here however. If you just woke up on a Friday and thought, "let’s go look at a house" and were under contract on Saturday and you did no preparation, planning and or praying along the way, then maybe you should reconsider. Otherwise, relax and enjoy. Home ownership is a wonderful privilege.
0 votes Thank Flag Link Tue Mar 5, 2013
Thanks for everyone who replied. It is multifactorial, but mainly due to external pressure.
0 votes Thank Flag Link Tue Mar 5, 2013
Hopefully my feeling of regret will resolve with time. I am also a first time home buyer and a home is the most expensive thing I have ever bought.
Flag Tue Mar 5, 2013
Wow, I am ALWAYS impressed by the great questions that get answered here in this forum!

Louise, the short answer to this question is consult an attorney. :) That's what my broker would want me to say to you.

With 20 years in this business, I can answer in part, as long as you know there are many variables that can change what I'm about to say.

In a MN purchase agreement, there are many places cited that can implement a cancellation of the purchase allowing everyone to back away with no harm done and earnest money refunded to the buyer. HOWEVER, those places are mostly set up for that to occur while there are still contingencies in place, like during inspection periods, appraisal work orders, etc. Once the transaction has rolled down hill enough that it's just prior to closing, it gets less likely anyone can back out without there being financial "damages" to be awarded to one party or another, or even litigation to force that party to "perform" or honor what they said they would do in the contract.

What you need to do FIRST thing is talk to your agent or your attorney, whoever is handling the transaction on your behalf to see what the wording in the purchase agreement says. If you don't have anybody representing you, that's a problem. You might want to seek out somebody in that event.

Good luck!!
0 votes Thank Flag Link Mon Mar 4, 2013
A typical Real Estate purchase agreement in Minnesota includes a Finance Contingency and an Inspection Contingency. There are usually your two big outs. If something else has changed dramatically the seller may let you out if they can still sell the property without a loss. Or they may keep your earnest money and let you go. In any case you need a top notch Realtor on your side and probably a Real Estate attorney as well.
Web Reference: http://www.mywra.net
0 votes Thank Flag Link Mon Mar 4, 2013
In Minnesota, you can cancel the agreement prior to closing, but you may lose your earnest money deposit and can be sued for specific performance if without good cause.

The exceptions to this is if you have an inspection contingency and something comes up on the inspection, or if you have a financing addendum and you are no longer able to get the rates and terms that you originally qualified for.
0 votes Thank Flag Link Mon Mar 4, 2013
Louise,
A Buyer can cancel a purchase at anytime, in most cases, but their earnest money would be lost if they don't have an acceptable escape from the contract. Read your purchase & sale, ask your agent or an attorney.
Now, if you are just having cold feet, be careful you don't make a big mistake. It can be perfectly normal ot have second thoughts, doubts and fears about buying a home and signing a mortgage. This only proves to me that you are a thinking and breathing human being who understands the nature of what you are doing. Just don't let the fear and worst case scenarios overwhelm you. If our worst fears control our action we wouldn't get out of bed in the morning.
0 votes Thank Flag Link Mon Mar 4, 2013
It depends on where you are at in the buying process? Are you still in your inspection period? Can you not qualify for the loan? If you are beyond the inspection period and can qualify for the loan and you are just changing your mind because you have cold feet.

The sellers can keep your earnest money and have the right to sue you for Non-performance.

Did you ask your agent? Or is your agent the same one as the sellers?
0 votes Thank Flag Link Mon Mar 4, 2013
Its really tough to say without looking at your contract, based on not knowing any of the specifics I would give you these general rules.
If you are the seller, you may get sued to be foreced to sell.
If you are the buyer, best case scenario is you will lose your earnest money and worst case is you could also be sued to purchase the property (specific performance).

Why do you wish to back out of the purchase? What ever is written in the signed offer will dictate what will happen. This is not meant to be legal advice.
0 votes Thank Flag Link Mon Mar 4, 2013
Agreed - it depends on what your contract states. Typically, if you back out prior to closing, after your contingencies have expired - you'll forfeit your earnest money deposit. Depending on the language in your contract, the consequences could be more or less "severe".

At the end of the day - no one can "force" you to sign the paperwork and purchase the house. However, in good faith, you agreed to the purchase the home - and the property was most likely "taken off the market" for all intents and purposes by a "contingent" or pending status allowing you time to inspect the property, get all your ducks in a row, and secure financing. Often, when other buyers/agents see a property under contract, they won't bother making an offer on it (unless it's a "back up" offer).

It depends on your contract, but the seller is most often always entitled to some type of compensation for the wasted time. The buyer has to have some "skin in the game" when the terms are agreed to initially - otherwise anyone could just "back out" at any time and leave the seller to assume all the risk.

Bottom line - check with your attorney, real estate professional, or read the specifics of your sales contract.

Hope that helps!
0 votes Thank Flag Link Mon Mar 4, 2013
It depends on the language in your sales contract, there are usually repercussions.

Chris
0 votes Thank Flag Link Mon Mar 4, 2013
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