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How to Get Out of Buying a House

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By Christopher Coble, Esq. on April 23, 2015 9:58 AM

Buying a house is a big decision. Huge! It's where you'll be spending everyday of your life for the foreseeable future. You'll have a mortgage, and you'll probably be spending the next 30 years paying it off.

So, it's understandable that some buyers may have cold feet. Can you leave the seller at the altar and back out of your contract?

Offer and Counteroffer

You found a house you liked, and you made an offer. Until the seller accepts your offer, you can retract that offer at any time. There is no contract. Similarly, if the seller makes a counteroffer, both of you can change your minds until you accept the counteroffer.

Offers are not agreements to contract until there has been an acceptance.

Contingencies

The seller has accepted your offer, and both of you have signed your contract. Don't worry. There are still avenues for you to back out.

Many contracts have contingencies, or conditions that must be met before the deal can be closed. The most common contingencies include:

  • Inspection -- The inspection contingency allows buyers the right to inspect the home, usually for things like structural damage or termites, before buying the home. If there are issues with the house that came up during inspection, depending on your agreement, you can either demand repairs or back out of your contract to buy the home.
  • Financing -- If you can't get a loan to pay for the home, most home sale contracts will allow you to back out. Some contracts may have a contingency requirement that you make a diligent effort to get a loan within a certain time period. So, you can't not apply for a loan and use this contingency to back out.
  • Title -- Make sure any home sale contract you sign has a title contingency. This means the sellers must prove that they actually own the home and are legally allowed to sell it. If the seller cannot prove title, you are entitled to cancel the contract.

If you want to cancel a contract because of an unsatisfied contingency, you'll usually be able to get any deposit you paid back.

Breach of Contract

If you're all out of contingencies, and you still want to back out, you can breach the contract. Most contracts have a liquidated damages clause that specifies how much the seller will get when the buyer breaks the contract. In addition, you'll lose any deposit that you paid.

Technically, the seller may try to sue you for specific performance. The seller is asking the court to order you to go through with the contract. However, these types of lawsuits are rare and expensive for both you and the seller.

If you are considering buying a home or canceling a contract to buy a home, consult with an experienced real estate attorney to assess your options.

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