Backing out of a contract

Did you hire a lawyer? Ask him (her).

I will be asking my lawyer, but I wanted to get some unbiased opinions from some other knowledgeable people as well.

depends on what your contingency says.

Why are you thinking of backing out - is it purely the delay or have you since changed your mind about the building? If just the delay, how imminent is closing i.e. is it worth the hassle if you can still close in next 6 months or so?

Any fees paid on this specific condo your bank would most likely keep and not roll in to a new loan assuming same bank. Why would you have paid to break the lock when you were nowhere close to closing at that time as afterwards the rate lock would have expired and floated?

If you already paid for an appraisal that cost is gone as it is for the appraisers time and report assuming it is written.

Also your legal fee is sunk for this transaction as I am sure your attorney will charge you when you switche properties to go over all again.

Assuming you are able to get out based on the contigency clause you would get your deposit back. However before you make any decisions I would make sure the developer is ready and willing if that will cause you not to be able to close on this other condo.

The delay has been very frustrating, but my dilemma has more to do with the fact that I may have found another condo that I like more, and this other building has just begun scheduling closings as early as this week.

Mikev, I locked in a rate for 90 days when the building got the TCO and I was told I would be able to close within a month or two. There has been one excuse after another and I am still a couple of months away from closing at the earliest, even though the building got the final CO in July.

When my rate expired, my Wells Fargo agent told me that I had two options: 1) Pay to break the lock and return to float, or 2) Pay to extend the lock. The mortgage rates plummeted since I orginially locked, so it was a no-brainer to break the lock. I was told that if I didn't pay to break the lock, my mortgage application would be terminated.

Tom, from other threads I think I know where you're in contract and where you're looking now. How familiar are you with the neighborhood? If you haven't already, take some time to walk around the immediate areas of the buildings you're considering. I've lived in between the two for nine years, and personally I think the area around the building you're in contract on is much much nicer -- both the environment (streets, buildings, trees) and the amenities (restaurants, bars, cafes, groceries, bakeries, parks).

On the other hand, I'm not at all familiar with the details of the actual buildings beyond having walked by both of them many times and seen the listings here, so if you really like the other one a lot more the above might not matter as much. But spend some time outside before you make a decision.

At that point your costs should have been low in terms of fees, application and possibly appraisal? it cost you more to make it float then possibly getting a new mortgage elsewhere? That is unless the building on has a lender that was willing to lend being a new development. Just seems they roped you into something as I have used wells fargo and my understanding was that it goes to float after the rate lock with no fees and that they actually would adjust down if the percent dropped enough. In the middle of finishing a refi and was told if percent went down by 1/4% would be able to reset, unfortunately only touched down 1/8% at most.

I can't believe you paid to "break the lock." If the rate lock expires, and you like your rate, I could see paying to extend the lock, but going to float is the default, and that should be free. Who the heck is your Wells Fargo agent? It sounds like there's a whole team of shysters robbing you, which I guess is not surprising, considering you are buying a pre-construction condo development in this environment.

I didn't really have much of a choice chooing a lender since it's a new construction and most lenders were requiring at least 75% of the units in contract before approving a loan. Wells Fargo is the preferred lender and they only required 51%. When the rate expired, it didn't seem like a good idea to cut ties with Wells to potentially save a few hundred dollars.

I locked my rate in right before the economy took a nosedive. It sounds silly to say, but I actually locked in at 5.1% (30yr fixed) and then a month later it was down to about 4.5% and has since gone down even further. The half a point I had to pay to break the lock will pay for itself within about 2 years.

But I'm assuming if I back out of the contract and buy a different condo, that half a point that I was going to be credited at closing will no longer be refunded. Plus a handful of other closing costs will be sunk, such as the appraisal fee, credit report fees, title fees, and attorney fees. The more I talk it out, it's starting to sound like a financial nightmare to back out this late in the game

why dont you get your lawyer to start 'negotiating' with the sponsor.. i.e., we are out of here if you dont cover the rate lock fee, etc etc etc.

You think the sponsor wants you to break your contract?

Tom, there is no way a lender would terminate your loan application because you refuse to pay a fake fee. You could stay with Wells Fargo but go with a different bank officer, and you really should. Threatening you unless you pay a fee they are not entitled to collect?! Are you kidding me?
Anyway, to answer your question: as long as your contract gives you an out for the delay, you can get your deposit back. You won't get what the loan shark picked from your pocket (maybe you should consider it an educational expense), or your various expenses (attorney, appraisal, etc.) but those should be minimal compared to actually buying a condo.

I don't mean to beat a dead horse -- but what was that $3,000 for, again? Was it for continuing to keep your loan application on file? Because I don't think your loan application expired after 90 days, did it? Just the rate lock? Was the guy saying that if you didn't agree to pay $3,000, Wells Fargo would stop doing business with you? If so...on what basis?

I think you should ask your attorney, and maybe also someone higher up at Wells Fargo, just what it was you paid for. The feeling I get -- and it's just a feeling -- is that they screwed you over by somehow convincing you to pay $3,000 to "break" a lock that was about to expire on its own. If so...that's terribly shady, and you'd need to get some legal advice on how to proceed. Maly may be right that you may have trouble getting it back -- but I'd definitely look into the possibility, and talk to a lawyer about it.

After reading through the chain, most of you are ignorant to the whole financing process. Regardless if you use a banker or broker, all banks have different policies when it comes to returning your rate to float. Like most sales people, bankers/brokers do not get paid until the loan closes nor does the bank for that matter. Take a step back and look at this persons scenario from a macro perspective. Wells locked the loan and promised to deliver that loan to an investor within a certain time frame. If Wells does not deliver the loan, they incur penalties. Now the penalties can be included in the new rate however if the loan never funds, Wells loses money. If it does, the borrower gets the upfront fee back at closing. You might be saying "I dont care if Wells loses money" but you should because if Wells fee goes up, so do rates. Thank you Dodd Frank. I understand rate is important, but if the person at Wells has done a great job and has assisted you throughout the process, he deserves to make money as well. Lowest/cheapest rate generally means no regard for service-everybody needs to find the right combination.

Excuse me rsd317, but won't the bank make money over the next 30 years of the loan?

yes, but this is still a business and they are certain policies in place to protect both the bank and client (lower rates/fees and better service). All I am saying is that you need to see the whole picture and the gentlemen that started this thread is not getting ripped off as there are different policies and procedures at different lenders. His decision should be made on the facs and who he feels comfortable working with, not the lowest fees/rate.

I never heard of such a thing as paying to break the lock and going to float. In that case you should have just let the rate expire. It is unlikely you will get anything you already paid back. There shouldn't be any further repercussions other that money you gave already. You shouldn't have to pay any title fees certainly and if the title company is charging you then I would fight that. Title companies know that deals fall through all the time. They may try to get you to pay but I wouldn't. Did you choose the title company or did your attorney? Sunny.hong@bankofamerica.com

I don't mean to sound sarcastic - but read the contact you have with WF. We can all sit here and tell you what our experiences have been, but at the end of the day, all the matters is what your contract says.

Are you asking about the contract with respect to the condo or the bank? As for the contract on the condo, in general, if you back out of the contact to purchase a condo you will loose your entire deposit. I lot of people have decided to do that over the last few years as the value of new construction decreased rather than increased after signing of the contract so your builder may have added extra costs - so read the contract. Some developers do allow a purchaser to back out at no cost if the building has not been completed in a certain amount of time - check your contract to see if you have that right and what the date is. Also, every new condo building is required to specify a date by which it expects construction to be complete. If your building is not completed by 1 year from that date, the builder is required to offer refunds (that is the issue being litigated in the Rushmore building on the UWS; the developer alleges that the date in the offering plan was a typo). Several buildings have been forced to give deposits back - 45 John St in FiDi is one; Setai on Broad Street is another.

As for your banks costs - I agree it seems odd you had to pay money to return to a floating rate - are you sure you didn't pay a fee to lock the rate again? That would make sense. When I locked my rate with WF, I paid half a point to lock my rate for 60 days and when I closed, that half a point was credited to my closing costs. If I didn't close, then all I was out was the cost of the appraisal, which WF had conducted right after I locked the rate - the remainder of the half a point would have been refunded to me.

As for closing costs, unless I am mis-understanding your question - you wouldn't pay those if you don't close. Transfer taxes, mortgage recording taxes, etc are only paid if you actually close. The other big cost is usually title insurance and if you don't close, no policy would be issued so you would have nothing to pay. I've never heard of a title company charging anything if you don't close.

Key is to read your contract - there really is no magic to it.