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Can You Back Out Of A House Offer?

Written by Allison Martin

Allison Martin is a personal finance enthusiast and a passionate entrepreneur. With over a decade of experience, Allison has made a name for herself as a syndicated financial writer. Her articles are published in leading publications, like Banks.com, Bankrate, The Wall Street Journal, MSN Money, and Investopedia. When she’s not busy creating content, Allison travels nationwide, sharing her knowledge and expertise in financial literacy and entrepreneurship through interactive workshops and programs. She also works as a Certified Financial Education Instructor (CFEI) dedicated to helping people from all walks of life achieve financial freedom and success.

Updated September 10, 2023​

3 min. read​

You’ve found the perfect property. But after making an offer on the home accepted by the seller, you begin to wonder if you made the right choice. Can you back out of the house offer, or is it too late? 

It depends, but doing so could be costly. Read on to learn more about what could happen if you rescind your offer to purchase a home and ways you can avoid adverse financial consequences. 

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Can A Buyer Back Out Before a Contract Is Signed?

Yes, you’re allowed to back out of an offer on a home before signing the purchase agreement. But you’ll need to act fast and notify your real estate agent that you’d like to rescind your offer. 

Can A Buyer Back Out After a Contract Is Signed?

After signing a purchase agreement, you could lose money if you withdraw your offer. The contract is legally binding, and the buyer and seller are both expected to uphold their end of the deal. 

But if you walk away, expect to lose your earnest money deposit, which is usually between 1 to 3 percent of the purchase price. So, if the seller accepts an offer for $275,000 and you breach the contract, you could forfeit between $2,750 and $8,250 that would have otherwise been used to cover a portion of your down payment or closing costs. 

Contracts With No Contingencies

If you sign a purchase agreement with no contingencies, you’ll be liable for liquidated damages (or your earnest money).  

Contracts With Contingencies

Savvy buyers include contingencies in their offer that allow them to breach the contract without financial consequences under certain conditions. (Be mindful that sellers commonly reject offers with contingencies in highly competitive markets). 

Common Contingency Clauses

Here are some common contingencies that could allow you to walk away from a home purchase agreement without incurring penalties. Contingency periods, or the time frame you can pull out without losing money, apply. 

Financing Approval

Unless you’re buying the home cash, you’ll need to work with a lender to secure a home loan. You’ll get a pre-approval from the mortgage company. Still, there’s no way to guarantee that the loan will be funded until you go through the underwriting process and receive a “clear to close” notification from the lender. And if your financial situation changes, you could be turned down for a loan. But a financial contingency lets you keep your earnest money if you’re unable to get a mortgage to buy the loan. 

Popular Mortgage Lenders
Angel Oak Home Loans Logo
Learn how Angel Oak mortgage lender can offer you home loan solutions tailored to meet your specific financing needs.

Submit an online application form to inquiry about Angel Oak Mortgage Solutions financing options.

American Advisors Group is a leading provider of reverse mortgage solutions nationwide to retirees and older Americans.

Older homeowners can get peace of mind and added financial security with a reverse mortgage from AAG.

In this review, learn more about Zero Mortgage's flexible home loan solutions and how to buy a home or refinance your mortgage with them.

Buy a home or refinance your existing mortgage with Zero Mortgage.

Sale Of Current Home

Your mortgage lender could require you to sell your current loan before financing a new one. Unfortunately, this can be challenging in some instances, so a home sale contingency shields you from liquidated damages if you cannot find a qualified buyer for your property.  

Home Inspection

The home inspection contingency should be included in your purchase agreement. In most instances, you can either rescind your offer and take your earnest money with you or renegotiate the purchase price with the seller if the home inspector identifies major issues with the property. 

Appraisal

If you’re financing the home purchase, the lender will require an appraisal to assess its fair market value. Lenders want to know that the home’s value is at or above the mortgage amount. Otherwise, you’ll have to make a larger down payment to make up the difference. Or you can move on to a different property and keep your earnest money if you have an appraisal contingency.  

Clear Title

You’ll also need a title contingency to ensure the home is free of liens or back taxes. Otherwise, you will be obligated to move forward with the purchase even if the title search identifies significant issues. 

Real Estate Offer FAQs

Below are some frequently asked questions regarding real estate offers. 

Do I Have To Withdraw My Offer If a Seller Is Not Responding?

Most offers are only valid for the period noted in the written document presented to the seller. If the seller doesn’t respond by the expiration date, the offer is no longer valid. Consequently, you won’t have to withdraw the offer since the seller never accepted it.

Can A Seller Back Out Of A Real Estate Contract?

Yes, and it can result in a lawsuit brought forth by the buyer. The buyer can potentially sue for damages or specific performance or a court order to complete the sale.

Does a Counteroffer Restart The Clock?

A counteroffer makes the original offer null and void. The agreement should include a date by which the seller has to make a decision. Some prospective buyers only provide a small window of one to three days before moving to other properties.

Will You Lose Money If You Withdraw An Offer On A House?

Yes, you could lose money if you withdraw an offer if you sign a purchase agreement with no contingency clauses unless the contract includes stipulations that allow you to walk away with your deposit if certain conditions aren’t met.

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