05 Nov How to Back Out of a Real Estate Deal As a Buyer
The sooner you say something, the better.
Whether you found a better house for you or you discovered a red flag, there are plenty of reasons that you might wonder how to back out of a real estate deal. But with all of the paperwork and people involved, it may feel like you don’t have any options. The good news is that often, you do.
Here’s how to back out of a real estate deal as a buyer.
Act fast—the sooner you back out, the more options you have.
If you are having cold feet about buying a home, don’t waste too much time before you speak up. The sooner you try to put the brakes on the process, the more likely it is that you will still have options that will let you walk away with minimal fallout.
The best time to pull out is before the purchase agreement contract has been fully executed. This means that all of the parties involved have signed it. If that hasn’t been completed yet, you can still stop the process fairly easily.
See if your contract gives you an out.
A typical real estate contract provides you with several potential escape clauses in the form of contingencies. One of the most common is if you are unable to sell your current home. Often, there are also contingencies that allow the contract to be terminated if your financing is not approved, if the appraisal comes in lower than expected, or if major issues turn up in the home inspection.
If the original deal included any stipulations or conditions that the seller must meet or actions they must take (such as completing certain repairs), and the seller fails to fulfill their end of the deal, this will also give you an opportunity to back out.
This is where a good real estate agent can be a lifesaver, as they can ensure the contract has as many buyer-friendly contingencies as possible. Keep in mind, though, that demanding a lot of contingencies may make you less appealing as a buyer, and could potentially hold up the deal. In a competitive market, requiring numerous contingencies can be risky.
Be prepared to pay for backing out.
If there are no applicable contingencies that allow you to cancel the deal, you will probably still be able to walk away—but it could cost you, and perhaps quite a bit. The seller has the legal right to sue you or try to get a court order forcing you to go through with the sale, but it’s pretty rare for a seller to take that step. More likely they could pursue reimbursement for any expenses they have incurred. There’s also a good chance that you will forfeit some or all of your earnest money, the deposit you put down when you made the offer. Depending on your reasons for considering how to back out of a real estate deal, the cost might be worth it—or it may not be.
Be nice to the seller—and they may return the favor.
Sellers are human, and they understand that unexpected things happen. Often, if you are honest and explain why you want or need to cancel the sale, a seller will be sympathetic. Be understanding that while the property is tied up with your contract, the seller was losing out on other potential buyers. Ideally, the seller has other buyers who have expressed interest and are still willing to make an offer. That will make the seller much more agreeable about letting you off the hook, so it never hurts to ask.