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Can You Withdraw an Offer On a House?

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When you buy a house, there are a lot of reasons the sale can fall through. However, things can get challenging if you want to back out of an accepted purchase offer.

It’s not completely impossible to back out of a signed contract with a seller, but there may be consequences.

Are You In Contract to Buy?

You’re not in a contract to buy a house until you’ve signed a purchase agreement.

To place an offer, you typically deliver the seller a written offer with an expiration date. If the seller doesn’t act on the offer within a certain time, the offer ends with no other action needed.

If you submit an offer in most states, it’s a contract. Then the seller signs it, and you’re in a contract to buy.

More frequently than the seller automatically signing, they return a counteroffer to you, and then they hope you, as the buyer, sign it. In some states, a buyer delivers a briefer statement of their offer, and then the seller must draft the full agreement to purchase. The buyer then signs that eventually.

Until both parties—buyer and seller—agree on the terms of the contract and have signed the purchase agreement, no one’s legally bound to anything. If you’re at this point, you can withdraw your offer whenever you want, and there’s no problem.

Your real estate agent contacts the seller’s agent and lets them know. They might send over a written confirmation that you’re withdrawing your offer.

What About An Accepted Offer?

When you sign a purchase agreement to buy a house, you’re legally bound to the contract’s terms. You give the seller earnest money, which is an upfront deposit. The earnest money is meant to show the seller you’re serious about buying their house.

Otherwise, if you didn’t pay the earnest money and the seller pulls the home off the market thinking you’re going to, it’s not fair to them. The earnest money then goes into an escrow account.

You might include contingencies in your purchase contract that would make it legal for you to back out, but only if they’re not met.

The conditions are what has to happen for you to move forward with buying a home.

Homebuyers might include a home inspection contingency or a contingency based on them getting financing. Other common contingencies include selling their house first or a contingency to protect them in case the home appraises for less than the agreed on sale price.

You can still get your earnest money back if you want out of the contract because of something based on a contingency.

So what if you don’t have a contingency as your reason and still want to back out?

In this case, you’re likely to lose your earnest money. You put the money down based on the agreement you’d follow through with your contract. If you back out for a reason not specified in your contract, you’re breaking your legal agreement.

Beyond losing your earnest money, a seller might have grounds to take further legal action. For example, you might be sued for what’s called specific performance. The court would force you to close on the home in that situation.  This isn’t common, but it’s still a reality you have to be prepared for.

It’s much easier to back out of buying a house before signing your purchase agreement. If you want to back out after signing the purchase agreement or after the expiration period of your contingencies, it’s likely to create financial and legal problems for you.

Some states include a clause in purchase agreements that you have to go to mediation with the seller if you’re in dispute. In that case, you might be able to work the situation out more effectively in a way that works for both of you.

Buying a home is a major commitment. If you need to back out, you need to communicate clearly with the seller as soon as possible. You may lose your earnest money and have to work with a lawyer to resolve the situation.

Written by Ashley Sutphin for www.RealtyTimes.com Copyright © 2022 Realty Times All Rights Reserved.

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