I Lost My Job

There are still plenty of people losing their jobs. So, if you lose your job and you are under contract to purchase a home, what happens?

First of all, don't panic. There are several options that may allow you to exit the contract without penalty, if that's what you want or need to do.

But first, consider having your agent talk to the seller's agent and discuss the possibility of delaying closing to give you some time to search for a new job. This doesn't always work, but if the sellers have the ability to be flexible and you believe your prospects of securing new employment are good, it's worth a try.

Now let's look at your options for getting out of the contract if that's what you need to do.

Hopefully, the contract was written with a financing contingency. This allows you an out if the lender will not give you a mortgage to buy the house. The financing contingency, like all contingencies, has a specified number of days in which you can exercise this option to get out of the contract. Hopefully, this contingency has not been removed when you lose your job. If this is still open, a letter from your lender declining your application, along with an explanation of your job situation should be enough to release you from the contract. Because there is no default, hopefully the sellers will sign the release and agree to release your earnest money deposit. But remember that this is never automatic.

As a buyer there are typically several additional "outs" in a contract. One of them is the home and/or radon inspections. If those have not yet been done you can use those as a reason for withdrawing from the contract.

And, if this is in a Homeowners's Association, you may be able to use the three days you have to review the HOA documents as another out.

If it's late in the game and you're close to settlement, it is possible that none of these options may be available. At that point, your agent should immediately talk to the seller's agent and lay out the situation. I'd like to think that people of good will could work something reasonable out. Hopefully, you can even still get your earnest money deposit back.

But better to lose that money than to buy a house you already know you can't afford!