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I signed a purchase agreement with a builder and put down $5000 earnest
money. At this point they have just finished framing the house. Now, I
have changed my mind about building the house and would like to back
out. The only clause I could see in the purchase agreement about the
buyer defaulting reads, "If you default, we may end this agreement and
retain all payments made by you under this agreement as liquidated
damages, or exercise all other legal or
equitable rights." At this point I am past caring about the earnest
money, especially since I have just changed my mind. But what does "all
other legal or equitable rights" mean exactly? Isn't that what the
earnest money is for, to cover any costs that they will incur? And if
they did choose to sue us and the ruling was in the builder's favor,
what would they be suing us for (ie would we be forced to purchase the
house, or would it be to cover any changes they would need to make to
market it as an inventory house)?
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You can back out right up to closing, but you do lose
your deposit(s). You requested a commitment from them
to build a particular house on a particular lot. They are
now building a house that someone else may not have
wanted. So they're also stuck.
Usually, there is a disclaimer clause about loan qualification
relieving you from following through. Why did you back
out?
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Bishop wrote:
You can back out right up to closing, but you do lose
your deposit(s). You requested a commitment from them
to build a particular house on a particular lot. They are
now building a house that someone else may not have
wanted. So they're also stuck.
Usually, there is a disclaimer clause about loan qualification
relieving you from following through. Why did you back
out?
She's a female, why do you think she backed out?
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Kaite,
If you breach, they will likely bring an action against you for their
expected profits, ie. what they would have made on the house after
paying expenses, etc. These would be their "other legal and equitable
rights." Under your stated logic. You could hire someone to build a
home, they could build it, minus painting or something, and then you
could walk away and only pay $5,000. This makes no sense. I would
definitely talk to a lawyer if you are planning on doing something like
this. I can't emphasise this enough. We could be talking about many
tens of thousands of dollars, maybe hundreds of thousands, depending on
the home. The liquidated damages provision you discuss as to default,
would probably be the one they would employ if you had signed an
agreement, paid the earnest money, but defaulted BEFORE construction
began. Now, their damages are certainly well above and beyond the
$5,000 earnest money. They've at least poured the foundation and framed
the house. Unfortunately, from your lack of information in the post, a
copy of the contract and info on your jurisdiction, there is no way
anyone here can give you a reasoned opinion. Run, don't walk to a good
lawyer unless you are going to finish the house.
Good luck,
David
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