Buying a home is the fulfillment of a dream for many. However, the milestone is also fraught with concerns.
You are, after all, making what may be the biggest financial transaction of your life. So what happens if you get “cold feet” and you want to back out?
It may depend on your reasons and the seller’s generosity
Generally speaking, when you make an offer on a house and it’s accepted, you have to put down what’s known as “earnest money.” This is both to show that your intentions to buy are serious and to protect the seller against potential lost sales opportunities while the home is pulled off the market before closing. If the deal doesn’t go through, the earnest money may belong to the seller as compensation.
Given that your earnest money can easily be 3% of the purchase price (which means $9,000 on a $300,000) home, you probably don’t want to lose that money. You might not have to if your reason for backing out of the deal falls into one or more contingencies that are built into the contract.
Common contingencies that may allow you to walk away with your earnest money intact include the following:
- You aren’t able to obtain financing.
- Unexpected issues crop up during the home inspection.
- The home appraisal isn’t as high as expected.
If you don’t have a reason that is one of the contingencies in your contract, you may be able to negotiate your way out of the deal with the seller without ending up in a legal battle.
Buying a home is a big deal, so treat the process carefully. Legal guidance can help you avoid some common pitfalls and protect your interests.
