Backing out of a home purchase
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Backing out of a home purchase
My wife and I have a signed contract to purchase a home in Massachusetts and we are due to close at the end of this month. All contingencies were met. Last week with no warning my wife was notified that she will not be asked to return to her teaching assistant position in the coming academic year. Our lender based our loan approval on my income alone as I earn significantly more than my wife. In my opinion, the loss of her income in September will not allow us to break even on expenses every month. Since the loss of her income has no effect on our financing
contingency, is my only other option to breach the contract, lose my 18K earnest money, and
potentially be sued?
Asked on May 7, 2019 under Real Estate Law, Massachusetts
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 3 years ago | Contributor
Yes, unfortunately you are right: if there are no contingencies that under under the plain terms of the contract you can use to terminate it without penalty, then you cannot get out of it. Changes in your financial situation do not provide a legal basis to terminate the contract except as provided by an contract contingencies. You will certainly lose your earnest money if you breach the contract; you may also be sued IF the seller can prove that the breach caused him or her greater losses than can be covered by the earnest money and if the terms of the contract permit it (sometimes, the contract states the keeping the earnest money or deposit is the seller's only recourse in event of breach).
Even if you run negative on expenses for a period of time, do you have the savings to weather some months? If so, would it make sense to purchase the house and see if your wife does get another job (whether teaching, office, retail, even waitressing or driving Uber/Lyft) in the short term to cover the shortfall; or whether if you hold the house for awhile, if the real estate market is rising where you are, if you could then sell it later and do well enough to minimize your loss?
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