Yes, you can back out of buying a house if you act quickly enough. But the farther along you are in the process, the harder it will be. You may lose money or risk a lawsuit if you've already signed the purchase agreement.
It's easy to back out of an offer on a house if you haven't signed any paperwork. You can usually walk away without repercussion, or contingencies in the contract may allow you to back out of the purchase under certain circumstances.
Ultimately, no one can force you to purchase a home against your will, so you can technically always walk away. But you may be forced to forfeit your deposit or face litigation if you don't abide by the stipulations in the purchase agreement.
Yes, you can back out of a purchase agreement, but there may be repercussions. A purchase agreement is a legally binding document that commits both the buyer and seller to the purchase at the agreed-upon price. If you sign the purchase agreement, it is much more difficult to back out of the sale. You will likely have to forfeit your deposit unless a contingency in the contract allows you to back out because there is an issue with the property or the financing.
There are a few scenarios where you may be able to back out of a home purchase without repercussions. The best time to back out of the contract is before signing the purchase agreement. Even if you've submitted an offer or you have an oral agreement with the seller, you can still back out if you haven't signed a contract.
Oral contracts won't hold up in court, and you can have your agent withdraw the offer if the seller has yet to accept it. But if the seller has already accepted your offer and you both signed a purchase agreement, you can't just walk away without a valid reason.
However, the purchase agreement typically contains contingencies that allow the buyer to back out if new information is brought to light during the due diligence phase or other circumstances change.
Backing Our Of Buying a House Contingencies
Home inspection contingency
The home inspection contingency allows a buyer to back out of a sale if the inspection reveals something unexpected. Say, for instance, that the roof needs to be replaced, which may cost an additional $10,000, you may decide to walk away instead of taking on the cost or waiting for the seller to do the work.
The appraisal contingency allows you to back out of the sale if the appraisal is lower than expected. Your lender will require an appraisal if you are financing the purchase, and if the value comes in lower than expected, you won't be approved for the total amount of the purchase. If you have the cash to make up the difference, you can still go through with the purchase or decide to walk away.
The financing contingency allows you to walk away from the purchase if you are not approved for a mortgage. Suppose your finances changed between the time you sought pre-approval or the lender discovered something unfavorable during the underwriting process. In those cases, you may be denied a loan after making an offer. So, you don't have to go through with the sale if you don't have the funds available.
If a title search uncovers any undisclosed issues, such as unpaid tax or mechanic's liens, the title contingency allows you to back out of the sale rather than taking on the burden yourself.
Home sale contingency
The home sale contingency allows you to make your current purchase dependent on the sale of your previous home. So, if you don't find a buyer in time or the deal doesn't go through for whatever reason, you may be able to back out of purchasing your new home without consequence.
Once you sign the purchase agreement, it's too late to back out of buying a house without a valid reason. While you may attempt to back out, you would be in breach of contract and may face repercussions for breaking a legally binding document. But, you can still back out of the contract during the due diligence period by using one of the above contingencies.
Typically, the point of no return is the final walkthrough. That is the last chance you have to voice any concerns before finalizing the paperwork. So if you want to renegotiate or potentially walk away from the sale, that's the time to do it. Even if you discover problems after the closing, it will be very challenging to dispute the purchase once you have signed all the paperwork. So if you plan on backing out of the sale, take action as soon as possible.
While it's rare, the seller can sue you for backing out of a contract. It's more common for the buyer to sue the seller for getting cold feet, but the opposite can occur. They will keep your earnest money deposit in most instances but won't waste time taking you to court.
There may even be a clause in the purchase agreement that states they are limited to keeping the deposit if you back out, in which case they could not take legal action. But ultimately, you are breaking a legally binding contract if you back out without a valid reason, so don't assume that you won't be sued just because it's uncommon.