A Ridiculously Buyer Favored Process (Part 2)

I’ve said this many times, but I want to expand on this idea a little more… Even though this is an EXTREME seller’s market, and the seller gets to have most of what they want, still, it’s the buyers who have the upper hand as far as the contract process goes. The seller has practically no way to get out of the contract and the buyer has dozens. Not only do we have an option period where you can drop out for any reason whatsoever, but there are also over a dozen other ways to drop out of the contract as well. These other “outs” almost work like a functional option period that lasts many weeks, almost until a couple of days before closing in many cases. Here are a few examples:

Beyond the option period and the finance contingency period, you also get time to drop out after receiving and reviewing HOA docs, which often don’t come until a couple of weeks into the contract.

Most homes in the suburbs are in a utility district, and before going under contract sellers usually don’t provide (or even possess) documents on the utility district. I’d venture that more than 90% of suburb contracts have this dropout provision by merely checking the “Other” box and citing: “Per Texas Water Code 49.452(a)(1)(f) Utility District Notice to Purchaser for Brushy Creek Water Control and Improvement District was not provided to buyers prior to execution of a binding contract of sale and purchase.”

The real kicker though is 2B in the Third Party Finance Addendum, which allows the lender to get you out of the contract basically by merely writing a letter. This is rarely ever any trouble because the lender is on your side. They want you to be happy, and keep your business, whatever home you might decide to buy. They also know that no one can force you to close, so they might as well help you terminate like you want. This item 2B cites: “If Buyer’s lender determines that the Property does not satisfy lender’s underwriting requirements for the loan… Buyer, not later than 3 days before the Closing Date, may terminate this contract… If Buyer terminates under this paragraph, the earnest money will be refunded to Buyer.”

Many use this as a no strings attached drop out clause up to 3 days before closing, and if you’re a buyer, you can too. Good realtors know this, that the buyers (even when in the wrong) almost always win the contract battles, and especially when it comes to the earnest money. If the seller wanted to try to withhold a buyer’s earnest money, then they would probably not be able to sell it to someone else after them. The buyer has to sign off on the release of money before the title company can issue the title policy to the next buyer. Unless a seller was extremely spiteful, there’s almost NO benefit to a seller trying to hang on to a terminated buyer’s earnest money… thus, buyers win almost all contract battles in Texas, as I have observed, and it’s a very easy in-and-out process, with little pain for the buyer.