Charlie Sheen Pals Say 'Back Out of Home Purchase'
Sheen made a $6.75 million offer on the mansion, reported TMZ. If the deal goes through and Mueller, who is a real estate investor, decides to take the now-out-of-work star of the TV series Two and a Half Men up on his offer, there are a few conditions she should put on the deal, as AOL Real Estate reported earlier this week.
But the deal with Mueller, who entered an agreement indicated in their court-approved divorce papers to not take spousal maintenance in exchange for $55,000 per month child support, is not the one the 45-year-old party-hardy actor should worry about right now. Nor is the home he is still trying to sell.
If indeed Sheen agrees with his advisors, just how would he get out of the home purchase, given the sellers already accepted the offer? Well, there are a few ways, say experts who spoke Real Estate, but they may not be so easy to finagle, especially if Sheen didn't lay the ground work in the contract.
Although reasons vary per state, some of them can apply to almost any potential home buyer.
Home inspector contingency
Typically a buyer can exit a deal without losing any earnest money they put down, if upon the home inspection they find material flaws with the home they are not willing to live with or negotiate away.
"The inspection issues that can come up are termites or structural issues," says New York real estate attorney Ed Mermelstein of Rheem Bell & Mermelstein LLP. The issue typically would be something that would cost $500 or more to repair, he says. "The owner usually will either have to repair the damage or you can withdraw."
I personally backed out of a home purchase in West Long Branch, N.J., nearly 15 years ago when the home inspection revealed severe termite damage in the basement and exterior walls.
When the owners are aware of the problem and didn't disclose it, it becomes even easier to back out.
"You can get out of a purchase for its misrepresentation," says Mermelstein. Although structural issues that fall under a home inspection contingency can be part of this category, so can some other issues, he says, such as finding out that the home is located near an oil spill or other toxic contamination, or on a flood plain or hill prone to landslides.
A seller may not be aware of of the problem, and it can still fall under the misrepresentation category. "Not knowing the contamination was there is not an argument," he says. Once discovered, however, he says the federal government requires a seller as well as a buyer to pay for the cleanup.
In Texas, Justine A. Smith of the Moxie Realty Group, says they have what's called an "option period" in which the buyer pays a fee to option the property, while they have it inspected or negotiate for repairs. However, buyers "can leave the contract during the period for any reason. Cold feet, lost of a job, a break up et cetera."
The normal option period is 10 days, she says, "but it is negotiable and we have seen them as long as 30 days for very complicated transactions."
In Rochester, NY, homeowner and book author Marcia Layton Turner, says a Realtor friend of hers just had a deal fall apart because the closing date got moved out a week later than the contract indicated. "The buyers became worried that it was going to be longer than a week before they could close and went out a found another home. The two parties are now fighting over whether the buyers are entitled to a return of their deposit.
Attorney's Approval Clause
Turner says getting your real estate attorney's approval (or disapproval, if the case may be), is another way to back out,
Although she herself has never had to use this clause, she tells AOL Real Estate. "We have an attorney's approval clause in our agreements here in Rochester, which gives buyers a lot of leeway in backing out if they want to. That is, if they decide a few days later that they'd rather buy a different place, they can ask their attorney not to approve the deal. They get their deposit back and move on. In addition, if the attorney sees something in the agreement that makes them nervous, they can point it out and let the buyer decide whether to proceed with the purchase or not."
Mermelstein definitely suggests that buyers use a real estate attorney if they are purchasing properties above about $50,000.
The purchase agreement will usually contain a section or separate form where the buyer describes how they will pay for the home. If they plan to use any kind financing they might indicate a conventional loan, FHA, or even if it will be a 30-year fixed or 7-year adjustable rate mortgage.
"If they are denied that financing during the time described they can leave the contract," Smith told AOL Real Estate.
I personally was able to get out of a contract and get my earnest money returned on a Brooklyn co-op I had a purchase agreement on back when I was on staff at Fortune after a little snafu turned into my mortgage lender denying my loan.
Another area where a buyer can leave the contract is if the lender's or bank's appraisal comes in below what you have offered on the property. "Say you have offered 200k and the bank says it's only worth 180k, then they buyer can leave," says Smith.
This can be part of a mortgage contingency, because if the lender doesn't think the property is worth it, it will not finance you. However, this option also works for those people who are paying cash.
Loss of Employment
Although this area could also fall under a mortgage contingency, but what if you were planning on paying cash? Although we don't know how Sheen was going to pay for the home, if it were ging to be cash, he just still might be able to argue an out now that CBS has pulled the plug on his popular hit series Two and a Half Men.
"It was a violence-tinged and anti-Semitic radio rant that helped push him over the edge and, finally, forced CBS and Warner Bros. Television to take action," reported the Associated Press. Although Mueller might want to reconsider living so close to Sheen, just maybe the sellers will have sympathy and let the man off the hook.
Sheree R. Curry, who has owned three homes but also successfully got out of two purchase agreements, is a three-time award-winning journalist who has covered real estate for six years. During her 20-year career, her articles have appeared regularly in the Wall Street Journal, TV Week, and Fortune. She's been writing for AOL Real Estate since 2009 from a Minneapolis-area rental. She seeks a book publisher -- or at least a lender who'll give a reasonable mortgage rate to a self-employed mom.
For more on mortgages and related topics see these AOL Real Estateguides:
- How to Get a Low Mortgage Rate
- Mortgage Jargon in Simple Terms
- How Much Home Can I Afford?
- How to Buy Foreclosures