Humans are notorious for changing their minds. It could be as simple as the flavor of ice cream to the color of your new car. But when you’re involved in a real estate transaction, changing your mind is a lot more serious and expensive.
A contract for the purchase of real estate, whether it’s a single-family home or a condo, is generally airtight after all the contingencies have been met. For instance, the buyer is applying for a mortgage and the seller has accepted the sale based on the buyer being approved for the mortgage stipulated in the contract.
This is usually the largest and most important contingency in a real estate contract and is the reason that sellers consider cash transactions more valuable. The buyer’s mortgage approval deadline is stated in the contract; and if it is not met, the contract is void unless the seller grants the buyer more time for approval. If this happens, it’s usually an issue of a title defect rather than financial and generally it can be resolved.
Other contingencies included in most contracts are inspections, like radon and termites. Inspections must be completed by a time certain, as stated in the contract, and if there is a failure during the inspection the buyer has the right to withdraw from the contract.
In Florida, or other states where termites are common, the seller can correct the problem and continue with the sale. However, it is not unusual for the buyer to use a minor issue in the inspection to withdraw from the contract for reasons that have nothing to do with the inspection, without even giving the seller the opportunity to correct the problem, because they just want out.
Buyers are human and are apt to change their minds right up to closing day. If a buyer wants to cancel a contract after the contingencies are satisfied, that may constitute a breach of contract, in which case the seller can return the deposit. Most contracts of sale allow the seller to retain the deposit as liquidated damages. However, it’s not uncommon for buyers go forward with litigation to recover their deposit. Obviously, settling this out of court will save both parties in the transaction stress and money.
What happens if the buyer finds a defect with the property after closing? This is probably the biggest nightmare situation for everyone, including the brokers who may not have any money at risk but will offer suggestions and try to resolve the situation in an effort to salvage their own reputation.
Property defects discovered after the closing almost always go back to a lack of disclosure. Even if sellers say they know nothing about the problem, it’s difficult for buyers to believe, and it never ends well. I’ve heard of or read about just about any situation, from animals living in the attic or basement without the previous owner knowing to roots blocking the sewer line and not being discovered by an inspector.
Appliances that die the day after closing are difficult to blame the seller for unless the buyer can prove they knew about a problem before closing. It’s also important to coordinate the on and off dates for electricity, especially in the summer when mold forms quickly and refrigerators get warm even faster. I’ve heard about personal items like expensive jewelry left in the house hidden and forgotten, and guns taped under drawers when furniture was being conveyed with the sale.
For the most part, people are honest and are not intentionally trying to kill the contract, but an abundance of honesty and careful inspections can guarantee a smooth transaction.
And don’t forget the emergency money on the top shelf of the kitchen cabinet on the day you move. That could stretch the bounds of honesty.
