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Buying or Selling a Home/Backing out of a real estate contract

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Expert: - 2/21/2008


Question
I signed up to buy an inventory home from a builder. 2 Months later due to economic reasons I decided to backout of the contract even though I met the financing contingency etc in the contract. I notified the builder 1 week before closing of my decision to backout. The builder is now suing me for specific performance/damages. I went thro an attorney and tried to settle out of court. I offered to pay carrying costs for about 4 months even though the time between my contract signing and backing out was less than 2 months. The builder wants $50,000 to settle out of court on a property that was valued at $370,000 at the time of contract signing and now is probably worth atleast 30,000 less now. This property is in north carolina. What are my options here and what is my worst case scenario? Any advice you can provide would be greatly appreciated. Thanks

Answer
Hello Ram - First of all my expertise is in Arizona. That said, you indicated you were represented by an attorney.. did the attorney specialize in litigation or real estate? In Arizona, there is no standard state or registrar of contractor contracts. Each builder has their own which complicates the efforts of an attorney working on your behalf. Most builders contracts state that you must perform within so many days of being notified by the builder that they are ready, or in the event of inventory homes within 30 days. Any reason on the buyers part for failing to close is a breach and the buyer is subject to forfeiture of the earnest money. There is usually added language or an addendum if it is a non-owner occupied property. In other words if you acquired as an investor.****Another potential item is financing. You indicated you were approved but did your contract include any language, or was there a finance addendum, where you stipulated the type and terms of the loan you were endeavoring to attain? If this is the case then usually if you are approved but the terms of approval are worse than the scenario indicated on the finance addendum there is potentially an out for the buyer with a full refund of the buyers earnest deposit. (if the form indicated 30yr fixed at 5.75% with 10% down and you could only be approved with 20% down, or possible the rate was 6% you may have an opportunity to state the loan terms indicated in the contract were unable to be obtained therefore I elect to cancel.) Again, it depends on the terms of the contract or upon the terms you negotiated. This happens to be an area that I specialize in and usually protect the buyer using this type of language. Again, in Arizona. Other than this the only other thing that would protect the buyer would be if there was structural or construction deficiencies. Please remember I am not an attorney but provide this information to you with the intent it will provide you with assistance in your endeavor. Sorry I could not help more. - Todd C. Menard

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Todd C. Menard

Expertise

National Association of Realtors Code of Ethics and Professional Standards * Contract Questions: 05/05 Arizona Real Estate Purchase Contract, Exclusive Buyer Broker Contracts, Listing Contracts and associated contract documentation as it relates to boilerplate, covenants, contingencies, procedures and procedures. * ARMLS Arizona Regional Multiple Listing questions * Real Estate Professional Standards and Practices, Ethics, Obligations, Duties * Agency relationships in Arizona, Procurring Cause * Questions typicaly arising during the listing period * Questions typically arising during the escrow period * Questions about working with a real estate agent/REALTOR * Questions Related to New Home Builders

Experience

National Association of REALTORS Board of Director (2011) Arizona Real Estate Salesperson License (1991-1995), Arizona Real Estate Brokers License (1995-Present), Arizona Association of REALTORS Board of Directors (2008-Present), Arizona Association of REALTORS Professional Standards Committee (2008-Present), AAR Certified NAR Code of Ethics and Professional Standards Instructor, Southeast Valley Regional Association of REALTORS President-Elect (2011) Southeast Valley Regional Association of REALTORS Board of Directors (2008, 2009), Southeast Valley Regional Association of REALTORS Grievance Committee Chairperson (1998-2007), Southeast Valley Regional Association of REALTORS Bylaws Committee (2008-Present), Southeast Valley Regional Association of REALTORS Education Committee (2008), Arizona Association of REALTORS Forms Committee - Residential Purchase Contract (2005), Arizona Association of REALTORS Forms Committee - Residential Rental Agreement (2008), Arizona Association of REALTORS Forms Committee - Buyer Broker Agreement (2009), Arizona Association of REALTORS Presidents Advisory Group, Road to Professionalism (2009), Arizona Association of REALTORS GRI Curriculum Review Committee (2009), Arizona Department of Real Estate, Commissioner's Education Advisory Group Sub-Panel B (2010) Arizona Department of Real Estate, Commissioner's Statute and License Review Committee (2007)

Organizations
National Association of REALTORS, Arizona Association of REALTORS, Arizona Real Estate Educators Association (AZREEA), Arizona Regional Multiple Listing System (ARMLS), American Notary Association, Southeast Valley Regional Association of REALTORS (SEVRAR), Southeast Valley Regional Association of REALTORS Women's Council of REALTORS (2010-Present), Phoenix Association of REALTORS (1994-2000, 2005-2009), Scottsdale Association of REALTORS (1994-2000, 2005-2009), Maricopa/Glendale Association of REALTORS (1994-2000, 2005-2009),

Publications
"Real Estate in 2008"- Lifebushido Publishing (Contributory Author), SEVRAR Magazine, Internet Crusade, RealTown ListServe, Blogger.com, Active Rain

Education/Credentials
- AAR Certified Ethics and Professional Standards Instructor, Graduate REALTOR Institute (1993), Certified Negotiation Expert (CNE), Over 100 Hours of annual real estate continuing education, Annual Ethics and Professional Standards Development Workshops as required by the National Association of REALTORS, Approx. 36 hours of NAR Code of Ethics training annually, Numerous IDW, Seminars and Train the Trainer programs, Business Management Degree - 1981

Awards and Honors
2009 REALTOR of the Year Award, Southeast Valley Regional Association of REALTORS (10,000+ Members), Double Platinum Production Award ($45,000,000 Sales Volume)- Keller Williams Realty Int'l (2001), Top 15 Sales Production Keller Williams Realty International (2001), Top 5 Sales Producation Keller Williams Realty Southwest Region (2001), Top Recruiter Award - Keller Williams Realty Int'l, SW Region (2002), Who's Who in U.S. Executive (1983), Who's Who in U.S. Real Estate Professionals (2007)

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