We bought a home eight weeks ago and the sale is closing next month. Now we’re trying to sell our current house, but aren’t getting any offers. Can we walk away from our purchase? – FEELING STUCK
DEAR STUCK: I’ve heard this question bounced around more times in the last 30 days that I have in the previous two decades. In the wake of a rather dramatic and unforeseen shift in the real estate market, you’re not alone in wondering if you can walk away from your purchase.
In the simplest terms, it boils down to this: a purchase agreement is a legally binding contract, and breaking that contract can have significant consequences. You’ll quite likely lose your deposit if you walk away, and if the sellers re-list their house and sell it again for less money, there’s a chance you could be responsible for their expenses and the potentially sizeable shortfall in their resale price.
The fallout may not end there. If you abandon your purchase and in doing so force your sellers to walk away from theirs, the cascade of costs could all roll back to you. Taking this type of action can leave you vulnerable. Talk to your lawyer about the scope of possible outcomes.
Fortunately, if you take action now, you can stay in control of the situation.
Start by talking to your Realtor, who can reach out to the seller’s Realtor and explore some options. Ideally, “Plan A” would involve selling your current house with enough time left to close on your purchase. “Plan B” might be to try and extend your closing by a few weeks, if necessary. You don’t need to commit to a specific plan just yet, but having 30 days to work with is better than three days, and more time gives you more options. Any number of plans beat the ostrich approach, in which someone sticks their head in the sand and hopes it’ll all go away.
This is the time to take a proactive look at your financing. If your house doesn’t sell, or ends up selling short of your expectations, you’ll need to beg or borrow some alternate funds to cover the deficit. If you can buy yourself a bit of time and the market rebounds slightly, you may be able to arrange a second mortgage on the home you are purchasing, or even a vendor take back. This may cost you a bit more out of the gate, but it’s important to remember that your home is a long-term investment. Unlike a stock that could potentially go to zero, the real estate market will bounce back and your home will inevitably be worth more in a few years than it is right now.
PRO TIP: Get your ducks in a row. Sell your current house and solve the problem, since holding out until the last minute can leave you highly vulnerable. If you have something to lose over the next couple of decades, I’d never advise you to walk away from a sale. #Advice #AskDavid #TheNegotiator
David is a top-selling K-W real estate Broker who works with you personally when selling or buying. Call for a free home evaluation, and scan here to vote for David in the 2022 Reader’s Choice Awards!