You’ve found the perfect home and your offer has been accepted. The next day your spouse tells you that their boss is transferring them out of state. Now, you’re wondering if you can back out of buying the house.
The good news is that you can retract your offer due to unforeseen circumstances. The bad news is that it could end up being costly. Depending on where you are in the closing process, you may also face some legal consequences.
Things to consider before retracting your offer
You must consider how much earnest money is at stake and what contingencies accompany your offer in order to understand the potential problems of rescinding your offer.
Earnest money is also known as a “good faith” deposit. The buyer gives it to the seller to show that they are serious about purchasing the house. The amount can be up 10% of the sale and when you close on the house, it is usually rolled into your down payment. Should you back out of the sale, you may lose the earnest money that you paid. That depends on the terms of the contract and any contingencies.
A contingency is a clause that allows you to retract your offer if certain conditions are not met before you close the deal. For example:
- A home appraisal contingency protects the buyer if the home is in poor condition or needs major repairs.
- A financing contingency protects the buyer if they can’t secure a mortgage loan.
- A title contingency protects the buyer if the seller cannot transfer the house free and clear due to a lien on the property.
If any of these contingencies aren’t met, you may be able to retract your offer without penalty.
The bottom line is that once you have signed a contract, you are legally bound to follow through — although there may be ways to break free. If circumstances should arise that make you want to rescind your offer to buy a home, you may need legal help to do so.