Life happens – plans change, new opportunities present themselves and unforeseen challenges pop-up when least expected, but what do these changes mean when you are in the middle of a real estate purchase? A home sale can fall through for a variety of reasons. Most people enter into a contract or make an offer fully intending to purchase the home in good faith. Sometimes life interrupts and circumstances change. What happens now? The bottom line is that you can back out of a real estate contract at any time — but depending upon when you do, you may have to forfeit the earnest money. There are two main scenarios when withdrawing an offer. Here’s what to expect from each, with one important rule of thumb: You need to rely on and communicate with your agent every step of the way to make this a successful process.
Within a Contingency Period
Once you and the seller have negotiated the contract and both have signed, the deal is now binding. However, a standard real estate contract comes with many contingencies. Meaning that all contingencies must be met for you to move forward with the purchase of the home. You’re agreeing to purchase the home based on a successful inspection, an appraisal, and most importantly, receiving the financing to purchase the home. When all of these contingencies are satisfied, then the transaction moves forward toward the final home purchase.
However, there might be a catch. If, for example, the inspector’s report noted that the foundation is leaking, and for that reason you’re no longer willing to buy the home, you’re perfectly within your rights to cancel the contract with a full return of all earnest money. No one wants to see a sale fall through, but better to happen in the early stages of the contract so the seller can quickly find a new buyer. This is the easiest way for both parties to walk away from the table.
Outside of a Contingency Period
Okay, so canceling within a contingency period is pretty straight-forward, however, outside of a contingency period things can get a little more complicated. If all parties have signed the contract and contingencies have all passed muster, you can expect to forfeit your earnest money when you default on a real estate contract. This serves to reimburse the seller for damages.
It can’t be said enough that regardless of when you find yourself considering a withdrawal, a seasoned real estate agent will make all the difference in advising how to navigate through this challenging process. Chances are, they have seen this scenario play out before, and you can benefit from their experience. If you find yourself in the latter situation, don’t freak out just yet. Consult your real estate agent ASAP.
Earlier is Better
If you want out of your contract, speak up sooner than later. As soon as you realize that you need to cancel the contract, notify your agent immediately. They will help you to fill out the proper paperwork and get the information over to the seller and ultimately out on the table. It’s a tough situation for everyone involved, but quick communication can help resolve the issue favorably all around.
Transparency is Key
As you can imagine, withdrawing from a contract usually does not go over well with sellers. If you find yourself canceling or withdrawing an offer, act with integrity and transparency by providing the appropriate information to the seller. Work with your agent to draft a letter and be sure to include a detailed explanation for voiding the agreement or requesting to be let out of the contract. Also, be sure to add in specific dates that reflect your change in circumstance to help the seller understand the immediacy of the situation as well.
Entering into a contract to purchase real estate is a delicate relationship – all is well until one party wants out. Situations can go south quickly and having a seasoned agent on your side is invaluable. Working closely with your agent and keeping the communication lines wide open is the best way to reach a favorable ending.
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Tom Reese has 20+ years experience in helping his clients sell their homes for a price that sells and makes them a profit. Tom has helped his clients buy and sell property in every neighborhood in Northern Kentucky and Cincinnati.
About Tom Reese
Helping my clients attain their dreams has been the foundation of my success. With my strong attention to customer service, I have earned my clients continued support and referrals. Put my enthusiasm and dedication to work for you!
Call Tom anytime at (859) 393-1293
Tom may be new to rapping but he’s not new to real estate!