real estate

How to back out of contract with 'ugly houses' agent

Steve McLindenDear Real Estate Adviser,
I was going to sell my home to one of those "ugly houses" agents and now I don't want to anymore. Can I still back out of a signed real estate contract? What can happen?
-- Joe G.

Dear Joe,
You have a pretty good chance of exiting this contract unscathed, but that doesn't mean the other party won't at least threaten to play hardball. And exiting this arrangement would probably be a good thing for you because these sorts of "ugly houses" companies tend to pay only 60 cents on the dollar.

Man with book going down the stairs | Hero Images/Getty Images

How to get out of real estate contract

It's a little hard to say what your options are without more details. But if the contract has been breached in any way by the buyer, such as earnest money (usually only about $500 in these cases) not arriving on time -- or at all -- to the title company, you can likely get off the hook. Same goes if the real estate contract wasn't signed/initialed by all parties. But I must point out that the fine print in these contracts tends to weigh heavily in favor of the buyer(s) since sellers typically don't have representation.

You should also know that a high percentage of people who contractually tie up homes like yours are doing so at the behest of a potential investor to whom they'd eventually assign it. If that's the case and the contract doesn't note that the purchase is assignable, that's another out. Or you could just try claiming that this scenario is a deceptive practice (a gray area) and say you're canceling because of it.

Beware of potential lawsuit

It's almost unheard of that a buyer can force your hand in such a sale, though technically you could be sued for non-performance. However, few such straw buyers have the wherewithal, extra capital or time to sue everyone who wants to wiggle out. They're essentially bird dogs scatter-shooting a bunch of properties in hopes of pocketing a couple grand in the form of assignment fees from the real buyer.

Most of these "buyers" who get spurned at the last minute will simply elect to move on to the next opportunity. Some, however, have been known to say they're going to keep your contract with them "in case you change your mind" because they know that might deter you from selling quickly elsewhere, especially if they stand to cash in big on your deal if you relent.

If the buyers are out inspection fees or anything else (rare in this situation), you could agree to reimburse those fees and, of course, any earnest money. In any case, be sure you document in writing that you're canceling the real estate contract and send that by registered letter to the buyer.

RATE SEARCH: Ready to buy a new home? Get prequalified for a mortgage today.

By the way, you'll almost always get less money out of such buyers than if you list and sell "as is" on the multiple listing service (MLS). Assuming you can get out of your current deal, you should at least meet with an experienced agent who can spell out your best options. Alternatively, you could offer the house to a short-sale investor, but that's always subject to a bank agreeing to the short-sale terms. Know that a high percentage of short sales fall apart.

If the buyers hold fast, I must recommend you see a real estate attorney, though I know that's probably not in your budget. Don't let yourself be intimidated.

Good luck!

Ask the adviser

To ask a question of the Real Estate Adviser, go to the "Ask the Experts" page and select "Buying, selling a home" as the topic. Read more Real Estate Adviser columns and more stories about real estate.

Bankrate's content, including the guidance of its advice-and-expert columns and this website, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this website is governed by Bankrate's Terms of Use.

advertisement


Connect with us