It seemed like the perfect home to buy – close to your kids’ school, walkable to restaurants and stores, and priced in your budget. Two days later after the contract was signed by the sellers, you panic and have buyer’s remorse. Can you legally get out of the contract?
If you opt out of your contract because of buyer’s remorse, there will be consequences – such as losing your deposit. Terminating a contract offer isn’t as easy as saying you don’t want the house anymore, but you can get out of the offer.
But there are several legitimate reasons why someone can get out of the contract, says James Lowry, attorney at Law Offices of James Lowry in Chicago.
“For one of my clients recently, the inspector found asbestos near the air ducts. That was a good reason to walk away,” he says. “In many areas of the country, including Chicagoland, there is a five-day attorney review period. For any other reason than price, an attorney representing either the buyer or seller can reject the contract.”
The courts give power to the attorneys. In good faith, he or she can also modify parts of the contract. There isn’t really a clear guide to it all, so anything (except for the price) might be able to be changed.
All too often, an attorney cancels a contract and their client immediately turns around and buys a different house.
If you feel like you shouldn’t or can’t buy the house, your best time to back out is during the contingencies and agreements. Contingencies are there to protect you if something is found during inspections or the appraisal goes too high.
Here are some contingencies and reasons that can help you get out of your contract without losing your deposit:
Finances Out of Whack
Your lender may have given you a pre-approval letter, but financial situations can change between the pre-approval and the home closing. Just make sure there is a contingency in the contract about financing since anything can happen.
Home Not Selling
If you’re unable to sell your current home, you might be able to get out legally. To make sure you’re safe, failure to sell the your curent home should be written as a contingency in the original contract.
“The closing date can be a bone of contention,” Lowry says. “It can definitely be an issue especially if somebody has to sell their property by a certain date, or they have two closings on the same date. Most mortgage companies require their clients not to have two mortgages at a time.”
A seller must follow state and federal regulations regarding the disclosure of known facts about the property’s condition and its history.
In an extreme case, learning that a violent crime occurred in the home you’re purchasing without the seller disclosing it is a way to get out of the contract.
Every state, though, has its own rules about what needs to be disclosed.
Since it’s a seller’s market in many areas of the country, you might just want to tell the truth that you want to back out. Your real estate agent might be able to ease you out of the contract, especially if they’ve done it before. Just be aware that you could end up losing your deposit.
Conditions Not Acceptable for FHA Loan
“FHA financing can be difficult sometimes. The properties have to be in certain conditions. If they aren’t, it is another way to get out of a contract,” Lowry adds.
FHA loans might be trickier to work around, but they offer low rates, low required credit and a low required downpayment. While you want the home buying process to go smoothly, and FHA loan still makes sense for many home buyers.
Appraisal Not Up to Par
If the home doesn’t appraise to a lender’s satisfaction, then the lender can’t finance it. This will immediately stop any type of home selling.
Boundary Lines Off
If the property has been inaccurately described, like having 300 feet of riverfront but it’s only 200, then it gives the buyer a chance to walk away from the deal.
There are a lot of laws surrounding real estate, so both parties will want to be as accurate as possible.
Repairs Not Made
There’s always a chance for a last minute walk-through before the closing. Sometimes, that seller makes promises in the contract to fix or renovate this or that.
If they haven’t made these fixes and repairs by the walk-through, or if they can’t show contracts that the work will be done and paid for, then it’s another chance to back out of the sale.
Ending a home purchase contract is not an easy task. So, it might be better to really take your time understanding the process of buying a home and in making that decision to make an offer.