What happens if you have to back out of a real estate contract at the last minute? Here’s what you need to know. It’s not impossible to get out of a real estate contract, but you’ll need to be prepared to pay for it in one way or another.
Why would you need to cancel a home purchase?
There are a lot of reasons a real estate deal can go south suddenly, even at the ultimate hour before closing.
Contingencies
If you had contingencies written into your offer, a contingency may not have been met. These can include:
- Appraisal coming in far lower than asking price
- Home inspection turning up multiple red flags
- Lender financing falling through
- Your current home not selling fast enough
If a contingency isn’t met, you get to walk away from the real estate deal, cancel your contract, and get your earnest money back.
Unexpected life events
Life happens unexpectedly. If you experience a major life event, like a catastrophic job loss, the death of a family member, a required move by your employer, or a deployment, you could suddenly become unable to buy the home.
In such cases, which aren’t usually covered by a contingency clause, you may have to throw yourself on the mercy of the seller and see if you can negotiate the return of at least part of your earnest money.
If you become aware that you may not be able to buy a home as you approach closing, the best thing to do is talk to the parties concerned and try to extricate yourself with the least financial damage.
It’s typically not in the sellers interest to get tied up in litigation over earnest money funds, Most sellers are willing to discuss the situation and come to a fair agreement. Be aware that you will likely need to leave them with some recompense for taking the house off the market and missing out on other offers.
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