There can be serious consequences if you back out of a home purchase transaction. Your deposit could be at risk, or you could find yourself involved in a legal action if you withdraw for a reason that’s not included in the contract. Before backing out, ask yourself why you don’t want to move forward.
Do you have buyer’s remorse? This is a common malady that hits most buyers at some time during their purchase. After making the commitment, the buyers have second thoughts. This aliment rarely lasts long and usually disappears on its own. So, don’t pull the plug on the deal until you’ve sorted through your feelings. Buying a home is unlike most business transactions. It’s not just about numbers; emotions are involved.
Sometimes buyers want out of the deal because they don’t trust that their agent is working on their behalf. In this case, the first step should be to have a candid talk with the agent. If that doesn’t improve the situation, talk to your agent’s manager to see if you can work with another agent in the office who will better serve your needs.
Backing out because you don’t see eye to eye with your agent usually isn’t deemed a legitimate reason for canceling a contract. However, if your agent acts contrary to your best interest, such as removing a contingency from a contract when you specifically told your agent not to remove the contingency unless other conditions were met by the seller, you should seek the advice of a knowledgeable real estate attorney.
Real estate agents or brokers who aren’t attorneys cannot give legal advice. Some agents do, particularly if they see that they might have liability, but they are practicing law without a license.
HOUSE HUNTING TIP: Most contracts include contingencies to protect the buyer and seller. Typical buyer contingencies are for inspections, property appraisal and loan approval. Depending on the contingency language, buyers can usually withdraw from a contract without penalty if they use their best efforts to satisfy the contingency and are unable to do so.
For example, home inspections almost always turn up defects — some minor, some major. If the foundation needs replacing and you can’t afford to do it, you have several options. Some inspection contingencies allow the buyer to withdraw without specifying a reason. In this case, you could back out and have your deposit returned if you didn’t want to negotiate a solution with the seller.
Some inspection contingencies require the buyers to give the sellers the opportunity to repair defects before they withdraw. If the buyers ask the sellers to replace the foundation and they agree, the buyers may not be able to back out without penalty.
However, let’s say the sellers will pay the cost of a new foundation but don’t want to do the work. If this were disclosed to the lender, the work would probably have to be done before the lender would fund the loan. If this wasn’t disclosed to the lender, it could constitute lender fraud.
Or perhaps there’s not enough time to get the work done by close. The buyers need to move out of their rental by a certain date and can’t wait an extra six weeks or more for the job to be done. Can the buyer back out without penalty in this situation? The sellers are willing to pay for the job. Here’s where you need legal advice.
Buyers often balk at paying for legal advice. Sometimes they push their agent to play attorney and rely on their agent’s advice, which might or might not be sound.
THE CLOSING: It’s worth every penny to get legal advice during a home purchase if it keeps you from losing money and keeps you out of a legal dispute.