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.
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.
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.
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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.
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.
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.
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.
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.
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.
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.
Save On Selling and Buying A House
There’s no way to guarantee that your home buying experience will be seamless. However, it would be best if you considered using an online platform like Offerpad to find your next home as it simplifies the home buying process from start to finish.
Offerpad currently lists homes in these markets:
- Atlanta, Georgia
- Austin, Texas
- Birmingham, Alabama
- Charlotte, North Carolina
- Columbia, South Carolina
- Columbus, Ohio
- Dallas, Texas
- Denver, Colorado
- Houston, Texas
- Indianapolis, Indiana
- Jacksonville, Floria
- Kansas City, Missouri
- Las Vegas, Nevada
- Nashville, Tennessee
- Orlando, Florida
- Phoenix, Arizona
- Raleigh, North Carolina
- Riverside, California
- Sacramento, California
- San Bernardino, California
- San Antonio, Texas
- St. Louis, Missouri
- Tampa, Florida
- Tucson, Arizona
When you buy with Offerpad, you’ll get a Dedicated Solutions Coordinator and up to $1,000 towards closing costs. And suppose you need to sell your current home before buying a new one. In that case, you can also take advantage of Offerpad’s Express and Flex offerings and their Bundle Rewards to help avoid paying double mortgages and coordinate the most ideal closing dates.
Find the perfect home today by simply using this online search tool on their website or submit your details to get more information about buying and selling a house with the company Offerpad.