What happens if buyers back out of a home purchase contract?
My husband and I are supposed to close on a resale home purchase on 3/31/10, but in meantime, we have decided to split up and divorce. The financing was to be in my name only (due to his bad credit). I need to notify the realtor and mortgage lender, but don't know what to say. Will we lose the $1,000 good faith deposit? I cannot afford the new home without my husband's income.
Assuming that there is not some legal ground for backing out at this time--e.g. you're still within some period specified within the contract to back out with penalty (most contracts don't have this, btw), or there's not some unfulfilled contingency, such as mortgage or inspection contingency you could cite--then you would lose the deposit if you back out of the contract. That's what happens if a party walks on a contract without some legal right to do so.
If there is a contingency, then depending on exactly what the contingency is, you may be able to get out and retrieve your deposit, but it depends on the exact wording of the contingency and the exact facts. For example, say you had a mortgage contingency. If you cannot qualify for a mortgage that *may* let you off the hook, though note: if you *could* qualify for it jointly, you may still be stuck, since it's not the seller's problem if you are now choosing to not buy the home together. As I say, much will depend on the exact working of the contract; you should have a RE attorney review it for you.