These home equity loans can be a source of cash for seniors, albeit an expensive one.
What is a notice of rescission?
A notice of rescission is a form given with the intention of terminating a contract, provided that the contract entered into is a voidable one. It releases the parties from obligations set forth in the contract, effectively restoring them to the positions they were in before the contract existed.
A notice of rescission can be mutually agreed upon by both parties, or it can be done by one party in a contract for a legitimate cause. There are situations in which a notice of rescission cannot be applied. They are:
- When it is not possible for both parties to bring back pre-contract positions.
- When it would cause a problem to a third party who is part of the contract.
- When the party requesting the rescission is guilty of violating the contract, also known as having “unclean hands.”
- When the party requesting the rescission already has received monetary damages.
The first step in the process of rescinding a contract is to review the contract to see whether it can be rescinded. If not, the party requesting rescission should get in touch with a lawyer and check the laws of rescission for the state. The next step is to find out whether there are legal grounds to support the rescission, such as duress, a mistake or fraud. Lastly, a written notice should be issued to the other party. Then, negotiations or filing of a lawsuit may follow.
Notice of rescission example
A homebuyer who made an offer on a house wants to back out of the offer because he decides to make an offer on another house. His purchase offer was accepted and he and the seller had signed a sales contract. The buyer’s agent sends a notice of rescission to the listing agent so that the seller will know the deal is off. The notice is given within three business days, per the terms of the contract.
Did you know you have a brief window of time to back out of a mortgage refinance loan or a HELOC? Find out more.