Buyer’s Guide to How to Get Out of a Real Estate Sale Contract
We know that buying a home or a piece of property is for many people the most expensive and important purchase you’ll make in your lifetime. Even if you are a real estate investor, each property you buy is important to your financial health. However, sometimes there are things that come up after you’ve signed the contract that make that purchase a bad decision, and you’ll want to back out of those kinds of deal before they impact your financial future. Here’s an in-depth look at some of the most common reasons buyers legally back out of real estate contract deals that we’ve seen at ZinnLaw in Southwest Florida.
Inspection issues
For sellers, the professional inspection can be nerve-wracking. That's because the inspector may identify structural problems that would cause the buyer to rethink their offer. Most buyers write a contingency clause into the sales contract that allows them to cancel the contract or renegotiate the terms if issues are identified on inspection. For example, if the professional home inspector determines the roof needs to be replaced or the plumbing system needs extensive repairs, buyers have options. They can:- Choose to walk away from the sale
- Ask the seller to make the repairs before closing
- Renegotiate the sales price based on the estimated cost of the repairs
Low appraisals
An appraisal is part of any real estate transaction that's financed with a mortgage. The lender requires the appraisal to determine the home's fair market value. An independent appraiser will conduct the assessment. If the appraiser determines the price you've agreed to pay for the house is higher than the home's fair market value, your lender won't cover the difference. In simple terms, if you agree to pay50,000 for a home, but the appraisal comes in at
25,000, the bank will only loan you
25,000. You'll have to rethink how to handle the purchase.
At that point, you have two options. Since your lender won't finance anything over the appraised value, you can make up the difference with cash. If you can't or don't want to pay the difference and have an appraisal contingency in place, you can walk away from the sale without penalty. Having an appraisal contingency protects buyers if the appraisal is low. You'll be able to retain your earnest money.
