Life is good and you believe you have found your forever home. However, what happens if you signed a contract to purchase that home and you changed your mind? Is there a way to cancel a real estate contract without being penalized?
When purchasing a house, once both parties (buyer and seller) have signed the real estate contact, a time called the “attorney review period” has begun. The attorney review period lasts for five business days, although this time can be extended if agreed upon by both parties. During this time attorneys will review the contract and work on negotiating any changes.
Also during this time, it is highly advised that you hire a professional home inspector. Read more about “What is included in a home inspection report” (https://laurenjacksonlaw.com/what-is-included-in-a-home-inspection-report/). The home inspection can make or break your deal. It can also change the purchase price significantly if major issues are found.
During the attorney review period, if both parties cannot ultimately come to an agreement on all issues, either side cancel the contract and the buyer’s earnest money is returned without penalty.
The major question, or problem scenario, is when the attorney review period has closed and you want to get out of the contact. At this point, if, as the buyer, you cancel the contract, will you lose all of your earnest money that you put down? The attorney answer is, that depends. Is your cancellation based upon a seller misrepresentation about the property? Does the property not appraise for the sale price? Did you lose your job and no longer qualify for your loan? These are all reasons for canceling that should get your earnest money returned. However, if you cancel because you no longer like the location of the property, or the exterior paint color is too bright, you are probably going to lose your earnest money.
As you can see, there are many contractual intricacies when dealing with real estate contracts, and timing is essential. If you don’t follow the proper steps at the right time, the consequences could cost you thousands. Any time you are buying or selling real estate we recommend you have a professional on your side that does this all day every day to help you navigate you through the process.