Homebuyer: What if I change my mind about buying a home?

The entire home buying process is complex and the buyer goes through a lot of trouble to find the right house that meets his goals. But the process of  buying a home doesn’t always go smoothly and problems can arise at any stage.

After finalizing a house the buyer needs to deposit a certain amount to secure his interest in the home. The amount deposited is around 1% to 3% of the home’s price and is paid within 3 to 5 days of the binding agreement. This deposit money is called an earnest money deposit. It assures the seller that the buyer is reliable and is seriously interested in purchasing the house. 

But earnest money deposits don’t guarantee a sale. It only ensures that the house is off the market for inspection and appraisal purposes. Your real estate agent San Antonio will guide you regarding the earnest money payable on finalizing a purchase. This earnest money is then deposited into an escrow account until closing, and is used towards the down payment of the house after the deal is finalized.

Now, what happens if the buyer changes his mind about buying the house?

Well, backing out of  a deal is complex. Different states specify different periods wherein the buyer can back out of the purchase contract and get a full refund of the earnest money paid. This period is called the right of rescission or cooling-off period. After the cooling-off period, the contract for sale becomes unconditional. And if the buyer decides to pull out of the contract after this period he  or she might be liable to pay compensation to the seller or forgo his earnest money deposit.

However, there are certain contingencies in real estate that allow the buyer to get out of the contract and get the earnest money back. But remember all contingencies have a particular deadline that is listed in the contract after proper negotiations. So if you change your mind about buying a house, you should inform the seller before the deadline. If you back out after certain deadlines or break the contract then you might not get your earnest money back. Ask your real estate agent about the deadline of different contingencies.

Real estate agent San Antonio has listed a few instances where you can back out of the contract and get your earnest money back.

• Inspection contingency:  

The purchase contract should specify a date during which the inspection of the house should be conducted. If during the inspection the buyer discovers any inevitable problem, then the buyer can ask the seller to do the needful repairs. And in case the seller disagrees the buyer has a right to opt-out of the contract and get the earnest money back.

However, if the buyer discovers some problem after the deadline of the inspection contingency and decides to drop out of the contract, then the seller can refuse to pay the buyer’s earnest money back.

• Financing contingency:  

Finance plays an important role in completing a purchase contract. Securing a loan takes some time and the loan contingency deadline is the final deadline in the contract. The financial contingency period is between two to three weeks from the binding agreement date. If the buyer is not able to get approval for a mortgage loan offer, he can back out of the contract with a full refund of the earnest money.

•  Appraisal contingency:   If the home appraises at a lower rate than the agreed price, and if the seller refuses to lower the price, then the seller can opt out of the contract to get the earnest money back. The deadline for the appraisal contingency is between 14 to 21 days of the binding agreement. 

• Home sell contingency:  

The purchase contract should also have a home sell contingency whereby the buyer can back out of the contract if his existing house does not sell in the stipulated time mentioned in the contract. This contingency is important to save the buyer from paying two mortgages at the same time.

•  Unsatisfactory repairs:  If any agreed repairs are not completed by the seller on time or the buyer is not satisfied with the repair work, he has a right to walk out of the purchase contract with a full refund of the earnest money.  

• Title issue: Along with inspection the buyer should also conduct a title search and land survey of the property. If the buyer finds an issue with the title such as an ownership dispute, he can void the contract and get the earnest money back.

• Other instances: The buyer can also get the earnest money back if he finds the seller to be a defaulter or the seller changes his heart and refuses to sell his property.

Circumstances when you cannot get your earnest money back:

If the buyer crosses all the deadlines of the contingencies mentioned in the contract and then decides to walk out of the contract, he will not be able to get the earnest money back. Also, if the buyer finds another house that fits his dream, and changes his mind about buying the house then the seller has full right to keep the earnest money.

Conclusion: