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I just got the appraisal back on a house I am under contract to buy, and the appraisal is "passing" but not impressive. I'll admit I screwed up doing my due diligence.

I can easily not qualify for the loan, so I don't think earnest money will be a problem.

I've already paid for inspection and appraisal, but what other costs might hit me if I back out?

Sam
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    If we knew the unknown costs, then they wouldn't be unknown. :-) – Jay Aug 31 '18 at 17:11
  • Why did you get an appraisal AFTER signing a contract? The time to get an appraisal is BEFORE signing the contract. After you've signed, it's basically too late to do anything about it. I suppose you can search for ways to weasel out of the contract, but, etc. – Jay Aug 31 '18 at 17:13
  • Maybe the rules are different where you live or you have different terms in the contract, but any time I've signed a contract to buy a house, the earnest money is non-refundable. If you fail to quality for the loan or back out for some reason, seller keeps the earnest money. That's what it's for: to protect the seller from a buyer who backs out at the last minute. – Jay Aug 31 '18 at 17:14
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    @Jay, that's not how the market works... When most properties are going under contract in 48 hours you don't have time to get an appraisal before making an offer. – Sam Aug 31 '18 at 17:15
  • @Jay, FYI https://www.colorado.gov/pacific/dora/division-real-estate-contracts-and-forms section 25 of the "Contract to Buy and Sell, Residential" – Sam Aug 31 '18 at 17:18
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    I have bought several houses in my life, and I have never signed a contract without first getting some sort of inspection or appraisal. Perhaps where you live things are vastly different, but according to this page, https://www.zillow.com/sellers-guide/average-time-to-sell-a-house/, the average house is on the market for 68 days, not 48 hours. This page, https://www.realtor.com/advice/sell/how-long-does-it-take-to-sell-a-house/, says 65 days. When a seller of any product tells me that I have to buy right now or I'll miss my chance, I say too bad, I guess I missed my chance. – Jay Aug 31 '18 at 17:30
  • @Jay, you are not being helpful, first of all you clearly understand that markets are different and two you are giving me advice that is only helpful in the past. – Sam Aug 31 '18 at 17:32
  • Let us continue this discussion in chat. – Jay Aug 31 '18 at 17:36
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    @Jay I've submitted dozens of offers and purchased multiple houses (in the US) and it has always gone like this: I make an offer to buy for $x and put up a small amount of earnest money, there are conditions in that offer that give me opportunities to back out without losing the earnest money, including inability to come to agreement on inspection outcome and ability to secure financing. Inspections rarely happen prior to offers being accepted. – Hart CO Aug 31 '18 at 18:00
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    @HartCO You can have contingencies in a contract for inspections or appraisals. See, for example, https://www.veteransunited.com/realestate/all-about-earnest-money-deposits/ Most of the houses I've bought and sold were in Ohio, where the procedure always was -- whether this was because of law or just custom -- you get an inspection or appraisal before you sign the contract, then you have a contingency that you get a second inspection just before closing, so if the seller tried to gut the property or there was some accident or something, you can back out. – Jay Aug 31 '18 at 18:04
  • Yes, of course if you can't come to an agreement you get your earnest money back. Then you never had a contract. Every house I've bought I had an inspection before I made an offer, though. As I say, maybe things are different in other parts of the country, but that was the routine where I've bought houses. – Jay Aug 31 '18 at 18:06
  • @Jay Interesting indeed, though it's definitely still a contract if you back out, that's why those clauses exist, to give chances to nullify the contract. – Hart CO Aug 31 '18 at 18:08
  • @Jay depends on the market. Here in Silicon Valley, the standard process is: seller gets an inspection to show prospective buyers. 5–10 buyers submit offers, most with no contingencies because otherwise the seller will just pick an offer without them. After an offer is accepted, you send them the earnest money, the loan provider gets an appraisal, and you hope it's for enough. – Kevin Aug 31 '18 at 20:34

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"I can easily not qualify for the loan, so I don't think earnest money will be a problem."

Careful - this sounds like you will attempt to back out of the contract hiding behind a bank excuse. If you have the ability to qualify given certain options available to you, but you choose not to enact those options, then that might be considered legally the same as simply backing out of the contract. IANAL, but such activity might make you required to pay up to the lost value on the home, if the sellers have to sell for less in the future. You should talk to your lawyer about this, not to the internet.

Grade 'Eh' Bacon
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Typically it is just any out of pocket expenses you've paid for inspections/appraisal and earnest money if you walk away outside the context of one of your offers 'outs'.

You'll want to scrutinize your offer to know for sure. You'd also want to check the wording of any agreement you signed with your realtor to make sure there are no substantial fees you'd have to pay them if backing out, this is not super common, but I've seen it in some agent agreements.

Hart CO
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