Purchasing a home is a major life decision that comes with many obstacles. Finding the right house is already a big step forward. Sadly, things may still not go your way after signing the purchase agreement. Fortunately, you can still cancel your offer if the house inspection uncovers issues, financing falls through or you change your mind.
However, it is crucial to remember that signing the purchase agreement is legally binding. Backing out of a contract that has no contingencies or for reasons not covered could cost a significant amount of money.
Real estate contingencies are clauses in the agreement that specify what conditions must be met to complete a sale. The buyer can cancel the contract if the seller cannot satisfy these conditions. Otherwise, the buyer may be subject to the following:
Loss of earnest money deposit
Withdrawing an offer for a noncontingent reason could cost you to lose your earnest money deposit. This deposit is an upfront payment you make to the seller as a show of sincerity. Canceling the sale without a valid reason may entitle the seller to keep your deposit.
Because they typically are a percentage of the home’s sale price, losing that amount could be pricey.
Legal action for breach of contract
Though this is uncommon, a disgruntled seller may choose to take legal action against you for breach of contract. Putting a house back on the market after a buyer backs out on closing day may reduce its value. As a result, sellers may claim that the buyer’s cancellation cost them monetary damages.
If you are having second thoughts about the house you just signed for, act sooner rather than later. Timeliness is of the essence for some contingencies, especially those that come with specific timeless and financial penalties. Consider working with a real estate attorney to help you achieve a smooth exit.