When you are involved in a real estate transaction, anything can happen. Perhaps you have experienced the ups and downs of a real estate sale before or you have heard the stories from friends or family members. The bottom line, is that entering into a real estate contract means you are about to embark on one of the largest financial journeys of your life. You must be prepared emotionally for all the twists and turns of deal with a real estate and that in includes answering this question: what happens when a buyer wants to cancel a real estate transaction? Let’s jump in!
What is real estate contract?
First, it is important to look at a real estate contract and define what it is exactly. Rocket Mortgage helps us learn a bit more about a real estate purchase agreement. “A real estate purchase agreement spells out the terms under which a buyer and seller agree to engage in a real estate transaction. Signing a purchase agreement effectively places both the buyer and seller (as well as the property in question) “under contract.” A binding legal agreement outlining key details of the home sale transaction, a real estate purchase agreement for a house may also be referred to as a real estate sales contract, home purchase agreement, real estate purchase contract or house purchase agreement.” This is when you are put into a legally binding situation and certain protocol must be followed if you want to proceed as planned or even cancel.
Let’s Talk About an Earnest Money Deposit
When discussing real estate contracts, it is important to first understand the earnest money deposit. When a home buyer makes an offer on a home that is for sale, the seller accepts the offer, and a contract is signed between the two parties. Now when this contract is signed, an earnest money deposit or “good faith deposit” is collected and lets the seller know that you are serious. Cusocal.org explains, “The Real Estate Purchase Agreement (also know as “the contract”) will state specific terms for how this deposit money will be held and by whom. It will also state the conditions upon which the earnest money can be refunded. In this way, the EMD protects home sellers from potential homebuyers who for, whatever reason, drop out of the buying process after their offer has already been accepted.” An earnest money deposit is not required by law, but it is customary to show the buyer that you mean business. Cusocal.org continues by adding, “There are several situations in which the earnest money deposit can be refunded, and these conditions or contingencies should be stated in the contract so both the buyer and seller fully understand the terms of the agreement they are entering. If the buyer no longer wants to purchase the home, and the reason is not covered by any of the contingencies stated in the contract, then the buyer could lose the deposit.” These contingencies can include: home inspection contingency, appraisal contingency, and financing contingency to name a few.
Backing Out of a Purchase Agreement?
So you have found your perfect home, signed a real estate contract, and then realize you need to back out of the deal. Now what? Now there are many reasons why a potential buyer may need to back out of a real estate contract. Perhaps there are issues with the loan financing, maybe there has been a job loss, a mortgage application is declined, the home inspection fails, the buyer can’t sell their current home, issues with the title, an agreement is not reached for terms of improvements/repairs to name a few. Listwithclever.com, helps us understand that, “The worst-case scenario for a buyer backing out of a purchase agreement is that they forfeit their earnest money. The earnest money is a deposit they put into escrow to show they’re serious about purchasing, and it comes to between 1% and 10% of the purchase price.” This can means tens of thousands of dollars lost which can be a huge deciding factor for many home buyers.
When Can you Back Out of a Purchase Agreement?
You may be wondering, when can you back out of a purchase agreement. Afterall, timing is everything in real estate. It truly depends on the state where the purchase is taking place, but most real estate contracts have a built in objection period (usually about 2 weeks) where the buyer can back out of the agreement without major penalties. Keep in mind, this objection period is usually before the home inspection and other contingencies that can cause stress. The contract will have all of the information, so make sure you are consulting the fine print since each real estate contract and transaction are different.
Working with Trusted House Buyers
At the end of the day, entering into a real estate contract when trying to sell your home the traditional way can be a stressful, unpredictable, and frustrating process. When you work with Trusted House Buyers, the house selling process is streamlined from start to finish. Here’s what to expect: At the initial consultation, we will walk through your home and evaluate the space, the neighborhood, and any work that needs to be done. Don’t worry about the condition of your home though! We take properties in any condition; it’s what we do! We can usually give you a fair cash offer for your home and can close within 10 days. This means that you will not have to deal with the ups and downs of a traditional sale process including inspections and contingencies. When you work with Trusted House Buyers, there are NO inspections and NO contingencies. In addition, you will not have to pay added fees that you find in a traditional sale, such as hefty agent commissions that can really eat at your profit. If working with a trusted buyer that can close on your house quickly and allow you to walk away from your home with cash in your hand, then give us a call today at 619-786-0973. We look forward to working together and helping you move on to the next chapter of your life!
