About Eric Sexton Expertise All aspects of buying and selling homes including: General real estate questions, Contracts, Negotiations, surveys, title work and general questions about mortgages. I CAN NOT GIVE LEGAL ADVICE AND WILL NOT BE ABLE TO ANSWER QUESTIONS WHERE LEGAL ADVICE IS NECESSARY.
Experience
I have been a real estate agent for 6 years and a broker for 2 years.
Organizations National Association of REALTORS and Texas Association of REALTORS.
Expert: Eric Sexton Date: 10/3/2007 Subject: Earnest Money
Question I have made an offer for a house for $155,000 which has been accepted. The seller has $1,000 of earnest money which I paid. The 10 day option period has expired. The seller has made repairs (gutter repair + bedroom paint) which I requested. The entire cost of the repairs was not disclosed to me. Now I am considering backing out of the deal to look at other properties. Could I be held liable for any amount in excess of the earnest money if I back out? Could the seller pursue legal action against me for backing out? Do I need to provide a reason to the seller if I choose to back out? Are there any acceptable or unacceptable reasons for backing out?
Answer AJ,
The option period gives the buyer the ability to back out of the contract for any reason within the time frame of the option period. Most buyers use this to do inspections, negotiate repairs and make sure they want to go ahead and buy the property. The idea is to protect the buyer and give the seller some level of comfort that the buyer will complete the transaction.
In this situation, most sellers just want to get their property back on the market so they can sell it. This does not mean this seller will feel this way.
In order for the seller to hold you "liable" for amounts in excess of the earnest money amount you would have to agree to pay that amount or the seller would have to take you to court. The repairs they have done will likely assist them with being presented another offer, so they might not care to ask you for additional money.
Could the seller pursue legal action? Yes they could, but once again, they probably just want to get the house back on the market.
Do you need to provide a reason? You don't have to, but in the interest of terminating the contract as cordially as possible I would suggest telling the seller that you have had second thoughts. If they know they will receive the earnest money, that might be sufficient in their minds to compensate them.
If you are going to terminate the contract, I would suggest getting a written document wherein you and the seller agree that the contract is terminated. If you are using a real estate agent they can provide you with an appropriate form.
