Some people change their minds after signing a contract to purchase a home when they see that the market has dropped. They feel that since the property is not worth as much now, they shouldn’t be paying more than the current market price. However, when you sign on the dotted line, the contract is binding. What are the consequences of not completing a signed contract?
The seller can sue for losses based on the original selling price of your purchase agreement. If the seller sells the property for less than the price on the original contract, they can sue the would-be buyer for the price difference.
In a recent case, the would-be buyers submitted an unconditional offer, only to later claim they could not secure a mortgage from the bank. Often, this is merely an excuse. Regardless, this situation could easily have been avoided by consulting with a mortgage broker before making any offers, especially unconditional ones.
The seller eventually sold the property for $375,000 less than the original agreement. The defendants argued that the seller should have renegotiated with them and reduced the price or waited until the market improved. These arguments are flawed. The buyers should have completed the sale and waited for the market to improve before selling the property themselves. Ultimately, the judge ordered the would-be buyers to pay the $375,000 difference.
In another case, a would-be buyer falsely claimed they couldn’t obtain a mortgage but later purchased two other properties. The buyer believed that because the contract was a one-page document handwritten in Chinese, it would be unenforceable in court. However, the judge found the contract enforceable and awarded the seller $408,000.
The lesson here is that you must do your due diligence before signing any purchase agreement. Once you sign, you are committed, whether the market price goes up or down. It is crucial to understand the binding nature of contracts and the responsibility involved in honoring your agreements. While market fluctuations can be unsettling, backing out of a signed purchase agreement is financially unwise. Buyers should ensure they are fully prepared and committed before signing a contract to avoid costly legal battles.
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