Home Buying in San Francisco>Question Details

liatt drori, Home Buyer in San Bruno, CA

Liquidation penalty

Asked by liatt drori, San Bruno, CA Wed Feb 19, 2014

I recently agreed to buy a new home. Unfortunately, due to circumstances that aren't legally relevant in this case, I would like to back out. The liquidation penalty was set at 3% of the home cost ($575,000). I have already paid $5,000. If I back out now, will I be held liable for the rest? Or will I simply lose my $5,000 initial payment? Thank you!

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3
Saulycohen,
Please start by reading your contract. Chances are it will explain whether the $5000 is part of the 3% or in addition to. You may also find a legal way out without penalty. If you don't feel confident in understanding what you signed, have it reviewed by an attorney. They may save you thousands, but time is not on your side. Get in front of one tomorrow.
If this is just a case of buyers remorse, you are in good company. Many buyers get cold feet, but when the options are weighed, most will move forward. You have to live somewhere.
1 vote Thank Flag Link Wed Feb 19, 2014
Read your contract and consult with your Realtor. The 3% liquidation clause is standard for real estate contracts. The KEY QUESTION is: have you removed your contingencies (i.e. inspection, appraisal, loan contingencies)???
0 votes Thank Flag Link Thu Feb 20, 2014
You are bound by the terms of the contract, Saulycohen. Ouch on the 3%. Try to explain your reasoning to the seller. Maybe they won't try to enforce it. If you backing out of the contract is harming them in any way, they will probably sue you for the balance.

Good luck!
0 votes Thank Flag Link Wed Feb 19, 2014
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