Expert: Hans Weber, Licensed Broker Associate - 2/20/2009

Question
QUESTION: Hi. Last year, around 6 months ago, I found a pre construction condo. I was told that it would be built by the summer of this year. I thought it was a deal at the time so I decided to sign a purchase agreement with them and I put a deposit down. It was signed 6 months ago. The purchase agreement however did not specify when the condo would be built even though I was told it would be finished by the summer of this year. The agreement did state that if the closing date exceeds 2 years after the agreement  was executed, then I can be refunded my deposit. Recently, I was notified that the condo would be finished next year, instead of this year, which I was told. I also found out that the neighborhood was worse than I thought due to a robbery. Now, I would like to back out of purchasing the home. What do you think will happen if I decide to back out of purchasing, even though the condo has not yet started construction? And what are the chances of me getting my deposit back? Also, will this affect my credit if I retract from purchasing? Thanks.

ANSWER: Hello Bruce,

Thank you for your question.

A contract is legal and binding.  As long as everyone is following the terms...

If they go beyond the closing date in the contract you can get out.
You can probably get out by giving up the deposit

The neighborhood is not a factor in the contract.

Your actions regarding the contract should not impact your credit.

If you really don't want it maybe you can try to sell your rights to someone else.  Is the complex selling out or not?  Perhaps the builder will compromise with you and let you out for a small fee.

The contract is the guide.  You are supposed to live by it.  But, you can try to do anything to get out of it.  Do you have a financing clause?  If you can't get the financing they should refund the deposit.

Good luck,

Hans

---------- FOLLOW-UP ----------

QUESTION: Hello Hans,
    Actually there was no specified closing date on the agreement because it has not even started construction. The closest thing to a written closing date is 2 years after the the agreement is executed so I don't even know if I can make it an issue since that time is next year. Also, I do not think the complex is selling well so I will not be able to sell my right s to someone else. There is a financing clause that says the seller can back out if I can't get the financing but I do have the financing. Maybe I can lend my money to a family member to show I don't have the financing. In addition, the lawyer that I assigned to sign the purchase agreement with, is associated with the company selling the condos. Should I ask him about the situation first or just hire another lawyer without him knowing? I really appreciate your advice. Thank you.

Answer
Hello Again!

If they haven't started building yet it doesn't seem they will be ready to deliver and close in the required 2 year schedule so you would get your moeny back.

The lawyer representing the building probably has a conflict of interest so you should have your own lawyer.

I guess you can juggle your funds and try to get a bank to reject your mortgage preapproval application which might occur with todays banking climate.  Further more the price/value of the condo you agreed on is probably lower now.


Hans