REO home purchasing, want to get out of the deal

Asked by Bob, 94566 Sun Sep 5, 2010

A friend is purchasing a REO home. Put $3000 deposit. The home inspector didn't find any major issues at the beginning. But when the pest control inspector doing the inspection, he found that the ground on the corner of the family room was wet after rain. Then my friend called the home inspector back and the inspector was very defensive and said wet part was under the carpet, so it was not his fault for didn't seeing that. And he thought it is not a big issue and refused to add it to the inspection report.

Now, my friend is very concerned about this issue. without the inspection report, can he cancel the purchasing contract because of this issue? Or can he cancel the contract by use some other excuses such as loan contingency?

Thanks for any advices.

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Answers

12
Desari Jabbar, Agent, Stone Mountain, GA
Sun Sep 5, 2010
Definitely discuss your options with your realtor. If you are still in your due diligence period, you can still cancel the contract and have your earnest money deposit refund. If you have an FHA loan, then your financing contingency can be your other option. As, a FHA appraiser would probably require all major repair issues be resolved before your loan can be approved.

But also consider the possibility that this isn't a major issue. Just because the termite inspector found a portion of the carpet that was wet, does not mean that it is a major issue. Speak with the home inspector again and try to find out the source of the moisture.

Best of luck to you!!
Web Reference:  http://www.DesariJabbar.com
1 vote
Brian Ripp, Agent, Fremont, CA
Sun Sep 5, 2010
Although we have not seen the contract, most offers have inspection contingencies. If so you should be able to cancel if you have not removed this contingency. Talk to the realtor or the Broker. And maybe an attorney.
1 vote
Thomas Tolbe…, Agent, Savannah, GA
Tue Sep 14, 2010
As long as your friend is within the contingency timeframe there should be no problem in terminating the contract and having the earnest money returned.
0 votes
Sylvia Barry,…, Agent, Marin, CA
Sun Sep 12, 2010
Your friend should be able to cancel the contract and get the deposit back from the seller (REO bank in this case) as long has he has not removed inspection contingency yet.

Sylvia
Web Reference:  http://www.SylviaBarryRE.com
0 votes
Tim Tilbury, Agent, Seattle, WA
Tue Sep 7, 2010
Hello Bob

Hopefully your friend has their own broker to represent them. If the broker does not know of this issue, provide them with these reports immediately.

Check the contingency deadlines to see if this falls within the inspection contingency time frame. If that time frame has passed, you may need to involve your broker and mortgage provider as previously mentioned.

This is not usual, but you may need to go this route if the inspection contingency has expired. Make sure your friend is protected...

Also, if they signed with the listing agent/broker, make sure they were given All Proper Documentation from State required agency pamphlets, agency disclosures etc to make sure they were properly (and legally) represented.
0 votes
Charo Bhatt, Agent, Fremont, CA
Tue Sep 7, 2010
Hello Bob,
I must appreciate that you are taking time to bring this purchase contract issue of your friend on trulia ground to get real estate professional’s opinion/advice.

Regardless of the floor damage line (found by the termite inspector) is added/corrected by the property inspector or not, if your friend is canceling the contract within the time specified in the purchase agreement for inspection contingency, he may cancel the contract and get his deposit refunded.

Do you know if he has partially removed contingency; say property condition contingency removed? If he has already removed inspection contingency and the only out you have now left is a loan contingency… then you really need to speak to your realtor and tell him/her to explain to the REO officer with evidences of damages found and see if bank is still willing to let you out and get your deposit refunded. If bank has a back offer higher than yours, they may work with you and let you keep your deposit.

Other option: if you have only loan contingency left, speak with your loan officer. He/she may be able to find a clause where your loan can’t be approved due to property condition, property not qualified for the loan.

You may also seek an attorney’s help. An attorney needs to examine your contract papers and facts to help you. An attorney can read all the fine lines which are not discussed in this discussion.

Good luck for getting your money refunded,

Charo Bhatt
CharoBhatt@gmail.com
510-381-2105
http://www.HomesByCharo.com
0 votes
William Pola…, Mortgage Broker Or Lender, Suwanee, GA
Sun Sep 5, 2010
I gave a thumb's up to Desari. Talk to the loan officer after looking at the contract for the financial contingency. Let the L.O. know about the issue and have him/her tell the underwriter of the issue. The underwriter will most likely turn down the loan for the condition of the property (unacceptable collateral).
0 votes
Bob, Home Buyer, 94566
Sun Sep 5, 2010
Thanks everyone who gave their kind answers. I will talk to my friend and get more detail about the contract.

Barb, when I purchased my first house a few years ago, my agent told me the same thing "you can cancel your contract for no reason." But when I talked to more agents, some of them said that "cancel reason" is not an accepted action. I guess I need to consult more experts about this issue.

John, I didn't cancel my Ruby hill purchase, but I did negotiated with the seller about the concern and got the price reduced. Thanks for the great help.
0 votes
John Juarez, Agent, Fremont, CA
Sun Sep 5, 2010
By the way, did you buy the Ruby Hills home or did you cancel that purchase?
0 votes
John Juarez, Agent, Fremont, CA
Sun Sep 5, 2010
I disagree with the opinion that you can cancel for “no reason”. A contract is entered into in good faith and to cancel for no reason is not a display of good faith.

No matter, your friend seems to have reason to cancel if he/she is within the contingency period that allows for cancellation if the condition of the house is not acceptable to the buyer.

Don’t take my opinion as fact. I have not seen the contract. I am not your friend’s agent. I am not an attorney. There may be more to the issue that we know.

What does your friend’s agent say? I hope it is not the listing agent who is undoubtedly hoping to close this sale. Advice from a person in that position might be slanted.

Your friend and agent need to carefully review the contact and discuss the options that are available. If they cannot get clarity on the issue, seek advice from the agent’s broker or, in last case, an attorney.
0 votes
Barbara Wils…, Agent, Danville, CA
Sun Sep 5, 2010
If you are still within the contingency period, you can cancel the contract for no reason. Where is your friend's realtor? They should be informing them of their rights.
0 votes
Jane Pacheco, Agent, Fremont, CA
Sun Sep 5, 2010
As long as contingencies have not been cleared, the buyer can still cancnel. Whether it is due to the inspections, by a professional or yourself, if you are not comfortable with the condition of the house, back out! Your deposit should be returned. You do not need a professional to backup your cancellation. It is enough that you don't want to proceed with the purchase because you have become uncertain it is the house for you.

Hope this helps.

Jane Pacheco
510-791-7644
Web Reference:  http://www.PachecoRealty.com
0 votes
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