When you submit an offer to purchase a home, It’s only natural to have second thoughts. Buying a home is a major life decision, If your offer to buy a house is accepted and THEN you decide to back out of the deal, things can get a little complicated. It is possible to back out, but it can be expensive and your actions may create a few legal issues.
Here are a few things you may wish to consider…
The Deposit
When you sign a purchase agreement, you will be asked to provide an upfront deposit. The deposit suggests to the seller that you’re serious about purchasing the property. If you back out of your offer, you could lose the full deposit.
Protecting Your Deposit
Working with your Realtor, you may wish to include "conditions" in your offer that allow you to back out of the purchase agreement without penalty. In order for the deal to be valid, the "conditions" will need to be satisfied. If the conditions are not satisfied the "offer shall become null and void and the deposit money shall be returned to the Buyer in full without interest or deduction".
You may wish to include these conditions in your offer:
Condition of Financing
You may request 5 business days to ensure that you are able to qualify for a mortgage. If you can't get the financing, don't buy the house.
Condition of Home Inspection
You may request 5 business days to have a Certified Home Inspector inspect the home. If the inspection uncovers significant problems, you may wish to walk away from the deal.
Condition of Satisfactory Appraisal
An Appraisal will determine the fair market value of a property. The appraised value of the home will be used when we qualify you for a mortgage. If the appraised value comes in at less than the purchase price, you may have to increase your down payment or mortgage. At all costs, avoid a bidding war unless you have a pre-approved mortgage and you stay within your financial limits.
Condition on Buyers Property Selling
If you haven’t sold your existing home, please include this condition in your offer. This condition will protect you from having to pay for two or more mortgages. Bridge financing can be very expensive.
Condition on Buyer Solicitor Approval
This condition allows your lawyer to review the purchase agreement and approve of the terms and conditions.
If you don’t have appropriate conditions in place, you may still be able to back out of a deal, but you risk losing your deposit. In addition, the seller may decide to sue, and a court could force you to pay any difference between your original price offer and what the seller can get from another buyer.
If you need to back out of an accepted offer, discuss the situation with your Realtor and Real Estate Lawyer immediately.