Are you wondering if you can get out of a real estate contract? The answer is typically “Yes, if…” What that “if” consists of will depend on several different factors. Backing out of a real estate contract at the last minute is still possible, but it can cost you.
Reasons You Might Want to Cancel a Home Purchase
There are a lot of reasons you could decide you need to cancel your planned home purchase. A major life change, a pending move, a death or a birth, or simply cold feet are all reasons you might want or need to get out even after the contract is signed.
More common are planned exits from a pending deal based on contingency clauses that provide an escape hatch if something turns out to be wrong with the home or other things don’t go to plan. Here are some of the stages at which you might need to get out of a real estate deal.
Contingencies aren’t met
When you structured your offer, you probably had contingencies written in to protect you in case the home was not as advertised. These contingencies can include a requirement for the home to appraise at or above asking price, and for a home inspection report to come back with no major issues.
You may also add contingencies for your financing to fall into place so the whole loan amount is funded, or for you to have a chance to sell the home you are living in before you buy the new house. If a contingency isn’t met, you get to walk away and keep your earnest money.
You might also have something happen that precludes your being able to complete the contract. You could lose access to the money you planned to use for your down payment. Someone in your family could pass away, making it a bad time to move forward with a home purchase.
A military member could be redeployed or stationed in a new city. Your job could even require you to move somewhere else than originally planned. Any of these reasons, while not covered by contingency clauses, could mean you need to get out of a real estate contract.
If you didn’t have contingencies, or bail on the deal for reasons not covered by a contingency clause after having your offer accepted, the seller typically gets awarded the earnest money. This can be a hit, financially, but can still be better than ending up with a house you no longer want or need, or one you can’t afford.
If you think you may need to get out of a real estate deal, and have already gotten close to closing, talk with your agent and lender. Hopefully you can mediate your way out of the deal without taking too hard of a monetary hit.
If there are legal disagreements on the release of the earnest money, sellers often will not want their property tied up in litigation as it will delay their ability to sell. Be upfront about the situation and try to negotiate a fair deal in regards to your earnest money.
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