Can a buyer withdraw an offer?
The quick answer is YES. You can change your mind on an offer to purchase a home. For as long contracts haven’t been signed and exchanged, you are free to change your mind without penalty.
Withdrawing an offer after the seller accepts, however, is a different story.
It definitely isn’t easy telling the seller that you are no longer interested OR that you feel that the offer you made may have been too much. Home buyers change their mind for many reasons. There are some important steps to take to cancel an agreement. And this would depend on what stage of agreement you are in.
How much time do I have?
You have the entire negotiation period to decide. If you’ve made an offer but both you and the seller haven’t signed the agreement, it’s still a safe period for you to change your mind. You may back out any time with no penalties.
However, once the buyer and seller’s signatures have been made, the contingency period has begun. In the contingency period, any cancellations made must only be based on a certain set of conditions that haven’t been met. There can be time limits to these contingencies too. If a buyer changes his mind beyond this time limit, he can be considered in default.
What steps should I take?
If you are in the negotiation stage, your correspondence via email or letter between the realtors and attorneys is enough to cancel the contract. During the contingency period, the buyer’s attorney must execute a document to cancel the agreement. Both parties are required to sign this document.
The buyer’s attorney will also have to look into home buyer contingencies that will allow such a cancellation. Sometimes there are contingencies that haven’t been met that merit termination. Examples of this are circumstances based on whether the buyer was able to sell their old home, liens, financing, or other legal issues.
But my offer has been accepted! How do I back out now?
If you change your mind AFTER the seller accepts your offer, you could be sued for specific performance.
Being sued for this, however, is not common. It’s rare for buyers to be compelled to purchase a house they don’t want. In addition, the chances of that happening are slim – considering the real estate market.
Buyers will just have to say goodbye to the earnest money they tendered. Sellers can also be awarded damages from the profits they lost after selling the place for less since they held the property for you.
What are valid reasons for backing out?
Check your contract for justified reasons to back out. Example contingencies include:
Buying a home is a life-changing decision. So do it with care. Take the time to find the right house. If you find yourself in a purchase agreement and realize that you have made a mistake, think it through. Talk with your real estate attorney and get their advice.