When Can You Refuse to Buy a House Without Losing Your Makings?
Can you opt out of an accepted signed offer to buy a home? After all, many things can happen during the close of any sale – job loss, medical emergencies, divorce – that may require you to change your plans. The good news is that yes, a signed offer can be canceled, but when you do, it will determine if you will lose your deposit.
Can you refuse an accepted offer to buy a home?
Yes, but it could cost you. By signing a contract for the sale of real estate, you are legally bound by the terms of the contract, which usually include an upfront payment called a down payment, usually 1-5% of the purchase price. The deposit shows the seller that you are a serious bidder willing to close the deal.
Of course, even with the best of intentions, there may be reasons why you do not decide prematurely to close a trade. This is why most sales contracts (drawn up by your real estate agent) include contingencies that allow you to renegotiate or cancel a deal without losing your earnings. Common contingencies include:
- Home Inspection: You can opt out of a deal if a home inspection reveals unexpected flaws that negatively impact the value of the property.
- Valuation: If the home’s valuation shows that the home is worth less than the purchase price and the seller will not renegotiate the deal, you can opt out of the deal.
- Selling your current home. Often people need to sell a house in order to buy a house. This circumstance prevents you from getting stuck paying off two mortgages.
- Funding: If you are denied a bank loan to buy a home, you can refuse it without penalty.
As the Washington Post notes , the seller can withhold the buyer’s deposit and sue for additional damages if they can prove that you deliberately thwarted the deal, either by jeopardizing the loan decision, taking on large debts, or quitting your job.
What if the unforeseen circumstances do not cover your reason for rejecting the offer?
Let’s say your reason for rejecting an offer is not related to unforeseen circumstances in your contract – for example, looking for a dream job in a new city. What to do then? Unfortunately, the fate of your deposit is in the hands of the seller. This is why you want to cancel your offer as soon as possible, as the longer you wait, the more inconvenience it will cause the seller.
Check with your real estate agent for next steps. Honesty is your best policy, as many sellers will be smart if the reason for your cancellation is because of a major, unexpected change in your life. Of course, you will have less traction if you just hesitate to own real estate. In this case, you might have to bite the bullet and wave your hand at your set money – certainly an expensive decision, but better than buying a home you would rather not own.