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Cancelling purchase agreement after inspection ok

Any legal ramifications on buyer if he changes mind and walks away after purchase agreement accepted and inspection done but before closing? I assume buyer would lose earnest money, anything else?
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November 12 2010 - Blaine
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Answers (13)

Mike is right....  Consult an attorney before taking any action.  There can be serious consequences.

Generally the only other "acceptable" reason to cancel at this point would be if you can't get a mortgage.

I hope that helps.  Good luck!

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March 12 2013
Most good inspectors can spot non compliant work a mile away. When the plumbing, electrical and carpentry are not to code in that new bathroom, you know a permit was never pulled.
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February 13 2013
Your purchase agreement should also reflect what happens to the earnest money if the contract is canceled.  A good buyer's agent will have checked the box where the money should be refunded to buyer.
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November 16 2010
First of all, I wonder why you did not use the home inspection time to raise these questions with the seller.  You can contact the assessor's office to find out if permits were pulled for the work that was done.  If they were not pulled and you still want to continue with the sale, you may want to ask the sellers to remedy this issue.  If they did not pulled permits, they may have to pay a fine and bring the work up to code.
In any event, I think you need to discuss this issue with your buyer agent, if the Property Disclosure says that no work has been done to the house without a permit, and you know that work was done without permits, that in itself may be grounds to get your deposit back since they failed to disclose that information.If you do not have an agent, then have a word with an attorney.  
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November 13 2010
If you become aware that permits were not pulled by the previous owner (and they were required) you would have to disclose that material fact on your sellers disclosure. Of course if you performed work without a permit, you would have to disclose that too. 

Once you become aware of a defect to the property, you have to disclose that defect when you sell the home - even if you are not responsible for the initial defect. If you aren't aware of the defect, of course you can't disclose that defect.

As an example, if you were buying a home and the sellers told you that in 2000 the basement had an inch of water after heavy rains but they installed drain tile, you would also have to disclose that fact. However you would also disclose the remedy of the drain tile installation and the fact that you have not had a wet basement in the time you have owned the property. 

The disclosure is designed not only to protect buyers but sellers as well. Once disclosed, it makes it less likely the sellers will be sued after closing.
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November 13 2010
Profile picture for Jim372
Thanks Mike. If I buy this home and after few years when I sell it, will I need to state on my disclosure that permits were pulled for the work previous owner did on basement? Or, do I not need to state any disclosure for the work that was done prior to my ownership?  Basically what likely issues can I run into in regards to missing permits if we bought this property.
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November 13 2010
Under a recent change to Minnesota law, homeowners now have to state in their sellers disclosure whether or not they pulled permits for work that was done. Unfortunately not all work requires permits. The most common permitted work is electrical and plumbing, including installation of water heaters and furnaces and roofs. 

Having a hunch that permits were not pulled is not enough to extract you from the purchase agreement. You would need proof that the sellers intentionally lied on their sellers disclosure. A trip to city hall and a meeting with the building inspector would clear up any question as to whether work was done without permits and what work needs a permit and what does not need permits.

Even if you are able to prove that the sellers lied on their disclosure, you would still need an attorney to provide the necessary documents to the seller. Otherwise you could not only lose your earnest money but also be sued for failure to perform on the purchase agreement, which is a legally binding contract.

For instance, if the sellers had purchased another home contingent on the sale of their existing home, and you backed out of the contract without a legal reason (or not done in a legal fashion), they could sue you for any damages they incurred because of your failure to perform on the purchase agreement. This could include their loss of earnest money as well as any damages they may have suffered due to their (and your) inability to perform on the contract they signed with their sellers.

As you can see, it can get real problematic really quick. The best advice is talk to an attorney before you attempt to exit this purchase agreement - even if you have cause.
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November 13 2010
Profile picture for wetdawgs
If your inspection shows things were not done to code, then you should have used that to bail with the inspection contingency.  It sounds like you are beyond that window now.

They say they had permits, you are speculating that they didn't.  The city offices will have that information.   

Please read your purchase offer contract, talk with your agent and an attorney.
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November 13 2010
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What if the seller lied on disclosure? The disclosure stated they pulled required permits but they did not. There are items in basement that do not seem to meet building code, and it makes me think they did not pull required permits or had inspection done by city. What recourse buyer has now? Can this be ground for cancelling purchase? We are past the inspection window.
If we continue with purchase, will buyer be responsible for pulling permits from city in future?
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November 13 2010
Your answer should be in your sales contract.  Look under default clause.  In our contracts in TX, if all contingencies have been satisfied, the seller can enforce specific perfomance, which means he can force you to go through with the sale.

Consult an attorney if you want to know the true ramifications specific to your contract.

Naima
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November 12 2010
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If you are beyond your contingency windows, you need to talk with your agent and attorney.  It may be worse than simply losing your earnest money.
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November 12 2010
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what if this is beyond the inspection contingency window? Can one still walk away?
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November 12 2010
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If you have in inspection contingency and don't like what is found, then you should be able to cancel.   Simply changing your mind and walking away isn't recommended, but it is a rare inspection where you can't find something to be disgruntled about.

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November 12 2010
 
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