What are the risk of a real estate contract.? Do many people back out and if they do are you looking at being in serious trouble?

Asked by Sylena, 87120 Mon Mar 29, 2010

Real estate contracts seem to be the way to get out of your home in today's market but I'm worried about the risk we may face.

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7
George, Both Buyer And Seller, Albuquerque, NM
Mon Nov 8, 2010
I am selling a home in ABQ,NM and have been approached twice by same Realtor about real estate contracts. He said the couple had plenty of assets and great jobs but walked away from underwater mortgage in Phoenix. He said typically it is a full price offer and 10-20% down. The Realtor said the people "Loved " the house and viewed it three times extensively. The potential buyers then offered 30,000. less than asking and 10,000. down substantially less than 10%. Two months later someone accessed all our personal accounts and charged 3000. over internet purchases. Perhaps no connection but suspicious. Realtor advised it was a great way to sell a house and the new trend. Is the Realtor available after the commission is paid and you are trying to evict someone not making payments?
0 votes
Steve Quinta…, Agent, Albuquerque, NM
Fri Oct 29, 2010
Your question deserves an answer tailored to your situation. First, are you referring to risk to the seller or to the buyer? Second, what do you mean by "back out". Third, serious trouble is an inexact way to describe your position in a contract. I would only answer this question if I knew the details of the situation or proposed situation. I suggest you get a confidential consultation with a knowledgeable professional. Pick someone willing to get the facts from you and investigate further, if necessary, before giving you an answer to an important question. Feel free to contact for more information.
0 votes
Lovey Frazier, Agent, Edgewood, NM
Thu Apr 1, 2010
Real Estate Contracts are a risk. Basically the seller is the bank. So the seller holds the same risks a bank does... foreclosure, trashing a house... I do not recommend the seller be the bank when they have a mortgage on the home. Because of the current issues with Real Estate lending and with the abundance of information readily available to banks the chances that the bank will review the loan and call it due are higher than they once were.

If you do not have a mortgage, Real Estate Contracts can be looked at as an investment. As an investment, you could get a higher return on your money than a typical investment.

A buyer on the other hand also carries some risk. 1. Losing their down payment if they walk away which is usually pretty high (10-20%.) 2. If the seller has a mortgage on the property and the bank finds out there is an REC on the property, they can call it due and foreclose if necessary. The buyer will likely lose their down payment and any other payments that they have made on the property.

Be very careful.

Lovey
Web Reference:  http://LoveyFrazier.com
0 votes
I recently sold our home on an REC to a Broker. December was the first payment to be made by her and she has already defaulted. Can anyone tell me what steps I should take to terminate the contract. This is a very negative way to start her end of the contract.
Flag Tue Dec 10, 2013
Mack McCoy, Agent, Seattle, WA
Mon Mar 29, 2010
Yeah, the risk is that your buyer trashes what used to be your home and is now your security. Then, they don't make the payments, and you foreclose on a house that needs to be bulldozed.

That's about the worst-case scenario.
0 votes
Mary Jo Daly, Agent, Chicago, IL
Mon Mar 29, 2010
Sylena
All contracts can be broken but some have consequences and you may lose earnest money. This question would be best answer by the attorney representing you. Good Luck with all your real estate transactions.
Web Reference:  http://www.maryjodaly.com
0 votes
David Staffo…, Agent, Albuquerque, NM
Mon Mar 29, 2010
Real estate contracts are a good way to sell right now, but there are lots of pitfalls for both sides, so you need to carefully navigate, something a good real estate professional or attorney can help you with. And do not let one agent represent both sides when a real estaet contract is involved. As the seller, you are well protected by most contracts in use in NM, but the best way to mitigate your risks is to get a large downpayment (at least 10%), so that the seller has skin in the game and even if they disregard that and trash the house and walk away (less likely with more money down), you will have enough money to fix up the house and sell again. Simply stated, the lower the downpayment, the higher the risk, but there are some more complexities than that, such as how to ensure your lender does not call your loan due (rare now, but could change in a few years).. Just email, text, or call me anytime and I will gladly provide some valuable advice with no cost or obligation. As for backing out before closing, the risks are similar to any other transactions, and you need earnest money. Best of luck Sylena!
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I have a question for you. What if the buyer has made all the payments but cant qualify to refinance the house when the contract is up. DOes it show as a forclosure on the buyer?
Flag Thu Nov 9, 2017
Patrick Thies, Agent, Anytown, IL
Mon Mar 29, 2010
Not exactly sure what your question is here. However, be careful about backing out of a deal if you are past contingency deadlines. There may be consequences for your actions.
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