Back out from purchase agreement

[eyephone]

The question of the day. Why do you want to back out?

 

[ochomebuyer01]

Anyone have experience of backing out after all the upgrades were selected? If so were you able to get back the earnest deposit and the upgrade deposits?

Generally I think it will be tough. Some builders might for extenuating circumstances, such as job loss or death in the family. But if it's just changing your mind then the odds are against you. Unless they are able to find another buyer to take the contract, then it might mitigate their damages and maybe they'd refund some of the deposits.
Has something dramatically changed for you?

Little off topic - What if we finalize the upgrade options and try to back out from purchase agreement because we like another property. Do you just lose earnest money + upgrade deposit or do you face any legal actions which may cost more?

Can you sign purchase agreement for another property when you are still cancelling this one?

I believe someone mentioned that you have to pay for the upgrades in addition to the deposit.  So let's say the home price was $800k, upgrades like floor tiles, counter tops, RO system, window treatment, is $24,000 and deposit was $25,000.  You will stand to lose possibly $49,000 to walk away. 

It depends but in most cases I've heard of, you usually only lose whatever you put in as a deposit for the upgrades (I think 50%), so you would be out about $12k.

If the builder is nice, they let you walk away with that as they make that up on the next buyer.

It really just depends which is why I said to ask your sales office. I've known a few people who were able to get most of their deposit back even after a month or more because the house wouldn't be ready for a few more months.

I signed the purchase agreement more than couple of months ago and deep into sales process. My closing is within 90 days so I am not sure how sales office will penalize me. Also they have very few homes left for sale.

 

[ochomebuyer01]

The question of the day. Why do you want to back out?

I kinda compromised on this home when I signed the purchase agreement. Wife and family wanted a home in Irvine even though it is a attached condo. my preference was always detached condo/SFH. I thought I would start liking this house but as I get close the closing I get a feeling that I won't be happy or fall in love with this home in future.

 

[eyephone]

The question of the day. Why do you want to back out?

I kinda compromised on this home when I signed the purchase agreement. Wife and family wanted a home in Irvine even though it is a attached condo. my preference was always detached condo/SFH. I thought I would start liking this house but as I get close the closing I get a feeling that I won't be happy or fall in love with this home in future.

Are you willing to let go of your deposit?

 

[AlexG]

If you are currently renting, you can continue with the purchase and move into this house, live in it for a year and sell it with a modest gain. You'll build some equity and you wont be wasting your money on rent. You should be fine, you'll more likely to build some equity with this option instead of letting your hard earned depsot go to waste for something slighlty better in your opinion.

There will be many oppertunities for more new homes in Irvine!!

 

[eyephone]

You mean live it for two years?

If you are currently renting, you can continue with the purchase and move into this house, live in it for a year and sell it with a modest gain. You'll build some equity and you wont be wasting your money on rent. You should be fine, you'll more likely to build some equity with this option instead of letting your hard earned depsot go to waste for something slighlty better in your opinion.

There will be many oppertunities for more new homes in Irvine!!

 

[lnc]

If you are currently renting, you can continue with the purchase and move into this house, live in it for a year and sell it with a modest gain. You'll build some equity and you wont be wasting your money on rent. You should be fine, you'll more likely to build some equity with this option instead of letting your hard earned depsot go to waste for something slighlty better in your opinion.

There will be many oppertunities for more new homes in Irvine!!

I agree on just go through the purchases, tough out for a short period of time then sell the home.  However, the buyer need to keep the home a lot longer than just one year. 

With current modest home price appreciation, buyer will most likely to loose some money if they sold the home within 3 year. 

The real estate transaction, broker's commission, closing cost etc will wipe out any price gain within that short time frame of less than 3 years.  Also when selling a new build soon after purchase, seller are also facing competition from the builder selling the same homes.

 

[SoclosetoIrvine]

+1 on eyephone.  If you do live in it, make sure 2 years or else you pay all gains


Also, did you try my advice earlier in the thread?  Trying to unqualify yourself financially?  And force the lender (most likely wells) to write a letter to the sales team that you no longer qualify for the loan?  You have nothing to lose at this point except your deposit....if it doesn't work, you either 1) lose your deposit 2) live in it for 2 years 3) buy it and rent it out...I don't think you'd break even, but probably only lose around $500/month on it while someone else helps you pay the rest of your mortgage...plus you get an asset ... not tooooo bad though you get new responsibilities as a landlord

 

[YellowFever]

.

 

[Perspective]

If you are currently renting, you can continue with the purchase and move into this house, live in it for a year and sell it with a modest gain. You'll build some equity and you wont be wasting your money on rent. You should be fine, you'll more likely to build some equity with this option instead of letting your hard earned depsot go to waste for something slighlty better in your opinion.

There will be many oppertunities for more new homes in Irvine!!

I'm not sure that's true.  You think it will appreciate 10%+ in one more year?? 

He'll need to spend money on:

-Landscaping (this is the big one)
-6% buyer/seller commission
-HOA costs (not deductible)
-Property Tax
-Interest
-Moving costs
-Pay taxes on any gains if any (if selling within first 2 years)

Add it all up, subtract some tax savings, then compare and see if it's better than walking away. My guess is that it'll be a loss...


The only possible way for you to walk away from it clean and maybe on top or break even is if you had bought something in Phase 1 of say Helena which was selling for $683,000 (res3).  Then the last phase was selling for $791k (confirmed when I called the office).  So after 26 or so phases, it went up over $100k.

Then yes, you may be able to sell it for an immediate $100k profit, minus taxes, $70k left, minus $48k in commission, minus a few more K in closing.  So it'll come real close.

What people 'think' they believe is that it will go up from $791k to $891k in 1-2 years??? (for attached?  ).  I don't think so.... I already see many detached homes in the mid $800s having a hard time selling already.... many are in SG, CV, WB.

Agreed. Rarely a good idea to buy a house with the plan to move in a year or two.

 

[YellowFever]

.

 

[ochomebuyer01]

If you are currently renting, you can continue with the purchase and move into this house, live in it for a year and sell it with a modest gain. You'll build some equity and you wont be wasting your money on rent. You should be fine, you'll more likely to build some equity with this option instead of letting your hard earned depsot go to waste for something slighlty better in your opinion.

There will be many oppertunities for more new homes in Irvine!!

I'm not sure that's true.  You think it will appreciate 10%+ in one more year?? 

He'll need to spend money on:

-Landscaping (this is the big one)
-6% buyer/seller commission
-HOA costs (not deductible)
-Property Tax
-Interest
-Moving costs
-Pay taxes on any gains if any (if selling within first 2 years)

Add it all up, subtract some tax savings, then compare and see if it's better than walking away. My guess is that it'll be a loss...


The only possible way for you to walk away from it clean and maybe on top or break even is if you had bought something in Phase 1 of say Helena which was selling for $683,000 (res3).  Then the last phase was selling for $791k (confirmed when I called the office).  So after 26 or so phases, it went up over $100k.

Then yes, you may be able to sell it for an immediate $100k profit, minus taxes, $70k left, minus $48k in commission, minus a few more K in closing.  So it'll come real close.

What people 'think' they believe is that it will go up from $791k to $891k in 1-2 years??? (for attached?  ).  I don't think so.... I already see many detached homes in the mid $800s having a hard time selling already.... many are in SG, CV, WB.

And let's not forget, a used home will always compete with a new home.  You will compete against the Irvine Co. so you can never sell for the same or more than TIC assuming all variables equal.

Thanks for the detailed post. The problem is I bought during later part of the phase releases and my lot is priced @ Mid 700s (with some upgrades). Add 10 K or more for landscaping and window furnishing. As you mentioned, I don't think the house prices will jump another 100K for attached condo. I am guessing I would be better off losing earnest money and get at least the deposit paid on upgrades. I just don't want to end up losing earnest deposit plus full cost of the upgrades. Not sure how Helena sales office will handle cancellations where they are almost sold out.

I am willing to settle for newer and bigger SFH new construction in Lake Forest which I always preferred. But no body can guess how the interest rates will be after 6 months and higher rates can put big dent on monthly payments. Decisions.. Decisions.. Decisions..  :-\

 

[eyephone]

If you are currently renting, you can continue with the purchase and move into this house, live in it for a year and sell it with a modest gain. You'll build some equity and you wont be wasting your money on rent. You should be fine, you'll more likely to build some equity with this option instead of letting your hard earned depsot go to waste for something slighlty better in your opinion.

There will be many oppertunities for more new homes in Irvine!!

I'm not sure that's true.  You think it will appreciate 10%+ in one more year?? 

He'll need to spend money on:

-Landscaping (this is the big one)
-6% buyer/seller commission
-HOA costs (not deductible)
-Property Tax
-Interest
-Moving costs
-Pay taxes on any gains if any (if selling within first 2 years)

Add it all up, subtract some tax savings, then compare and see if it's better than walking away. My guess is that it'll be a loss...


The only possible way for you to walk away from it clean and maybe on top or break even is if you had bought something in Phase 1 of say Helena which was selling for $683,000 (res3).  Then the last phase was selling for $791k (confirmed when I called the office).  So after 26 or so phases, it went up over $100k.

Then yes, you may be able to sell it for an immediate $100k profit, minus taxes, $70k left, minus $48k in commission, minus a few more K in closing.  So it'll come real close.

What people 'think' they believe is that it will go up from $791k to $891k in 1-2 years??? (for attached?  ).  I don't think so.... I already see many detached homes in the mid $800s having a hard time selling already.... many are in SG, CV, WB.

Agreed. Rarely a good idea to buy a house with the plan to move in a year or two.

I say it's okay after the Two year mark.

 

[OCSolCal]

I've been reading this thread to get some ideas but still unsure of how to proceed.  We just deposited a Lennar home less than a month ago but are getting cold feet so stopped by the sales office today to back out.  The sales office said Lennar rarely will refund deposit back since we are in contract.  Any suggestions?  We didn't choose any upgrades.  It's Lennar so everything is included except floors/window covering which we have not selected yet.  Any advice? Any experience with a Lennar builder purchase contract?

 

[jmoney74]

I've been reading this thread to get some ideas but still unsure of how to proceed.  We just deposited a Lennar home less than a month ago but are getting cold feet so stopped by the sales office today to back out.  The sales office said Lennar rarely will refund deposit back since we are in contract.  Any suggestions?  We didn't choose any upgrades.  It's Lennar so everything is included except floors/window covering which we have not selected yet.  Any advice? Any experience with a Lennar builder purchase contract?

Can you mess with the lender and not be approved anymore?  Empty your down payment account. Lol

 

[potsticker]

It was a mistake to go into the sales center and ask them about backing out. If you went in there from the beginning saying that there was a major change in your finances/life, such as a job change, family issue, relocation, etc - it's likely they would've worked with you and let you out (with proof). Now, you might already be flagged by the sales staff...going to be hard to get out of it without losing your deposit.

 

[Nimby]

It may sound harsh but you did sign a contract and last I checked a contract is a contract is a contract regardless what it pertains to. That's why contracts exist, accountability. Take the hit move on lesson learned don't sign tell your ready to keep your word.

 

[jmoney74]

It may sound harsh but you did sign a contract and last I checked a contract is a contract is a contract regardless what it pertains to. That's why contracts exist, accountability. Take the hit move on lesson learned don't sign tell your ready to keep your word.

Indeed but he's not asking for parental advice. Asking how to get out which some have done.

 

[Burn That Belly]

x

 

[notTHEoc]

Most people do get their money back especially if builder can't show that it has been damaged.

Iirc if it's been less than 17 days CA requires buyer to get deposit back. If it's been longer, builder must show its been damaged. So if Lennar eventually sells it at the same price to someone else, they should refund you.

I don't recall the specifics but this is why many reputable builders will just refund you especially if the market is healthy.