Expert: liznarr - 5/21/2007

Question
I found a house that I liked.  The sellers were offering 5,000 towards repair.  I
got the house inspected and they offered 1/2 of the monies for repairs.  
($7600 total) I later found out that a grant I was hoping to receive fell
through and I was unable to get 10,000 towards closing.  The sellers are then
offered me 10,000 to cover closing and are selling the property as is now.  It
will take me an additional 10, 000 to get the house to were I would feel
comfortable and the monthly payments are still uncomfortable for a single
mother with 3 kids fresh out of bankruptcy (within 2 years) having o take a
subprime loan.  I have been approved and awaiting closing in the next 2
weeks.  I decided to ask to be released from my contract from the sellers.  
Can they take me to court?  Will I be able to get out of the contract easily?  Va
is my home state. . .  

Answer
Hi Deanna,

Your written Contract of Sale is the document that controls what happens throughout the buying process, and I am making several assumptions based on what you have written me.  

First, I am assuming that your Contract of Sale is, in fact, in written form and is contingent on financing.  In other words, if your financing is not approved, you would not obligated to purchase this property; and you should not be penalized for a non-closing if you were unable to obtain a loan for the purchase.

If the Sellers agreed in the written Contract of Sale to pay $5,000 toward repairs, and then added another $2,600 as a result of your home inspection, Sellers agreed to pay (or credit) you a total of $7,600.  (Again, assuming this is all spelled out in your written Contract.)

What is unclear to me is whether or not the $10,000 change to cover your closing costs and also to now purchase in as-is condition was a written addendum to your Contract.  (1)  If this is NOT in writing, and (2) you do not now have the $10,000 grant money to apply to either closing costs and/or repairs due to your grant having fallen through, and (3) your lender would not approve you based on this, (4) all you need is a REJECTION LETTER from your lender for a clean “out” of your Contract.

If the written Contract is still in its original state without a change being made for purchasing in as-is condition and the $10,000 change for closing costs paid by the Seller – along with the fact that your grant money has fallen through – you need to make your lender aware of this immediately.

You state that your lender has now approved you, but I do not know whether or not your lender is aware of the repairs that need to be made and the fact that your grant money fell through.  If the lender is not aware of approximately $7,600 worth of repairs that need to be made (plus another $2,600 “half” for a TOTAL of $10,200 of repairs) to get this house in acceptable condition, you need to let them know this ASAP.  This could make a difference in whether or not their approval is valid.

If the Sellers will not voluntarily agree to release you (and this should be without penalty), then you need a rejection letter from your lender.

I hope the above information is helpful and points you in the right direction.

Good luck to you.

Regards,
Elizabeth