No real estate contract has been designed to handle a pandemic so it is understandable that some buyers may want to back out of a real estate transaction during this time. While we have plenty of buyers and sellers coming together over real estate during the coronavirus, there are those odd situations where a buyer may need to back out.
The goal in any real estate transaction is for all parties to walk away with a win-win scenario. This doesn't just mean buyer and seller but agents, escrow, and lenders alike. Regardless of the reason, there may be something in your gut is telling you to back out but how can you do so tactfully and legally?
There are some ways to back out of a real estate transaction that are already set forth in the purchase and sale contract. These common reasons for backing out of a real estate transaction include:
- Financing falls through.
- The house appraises for less than the sale price.
- The inspection reveals significant issues.
- The buyer cannot sell their own house and therefore contingency clause fails.
- Before you've actually gone under contract.
- If you're willing to forgo your earnest money deposit.
All of these reasons are already set forth in the purchase and sale contract. Most buyers agents… Good real estate agents, are able to get their buyers out of a real estate transaction using one of these scenarios. Typically, it's the home inspection. If a buyer simply wants to get out and they've already conducted the inspection, a buyer can simply walk away stating that they are not satisfied with the home inspection report. This is usually the most common but the other scenarios are often used as well.
If the home does not appraise for the asking price, the buyer will either need to make up the difference or the seller will lower the price. Both of which need to be agreed upon and if there can be no agreement, the buyer is able to walk away.
If the buyer has a home that they are trying to sell and it is written into the purchase and sale contract but then the seller insists that the buyer make a decision through a kick-out clause and the buyer is unable to sell or maintain two mortgages, the deal can dissolve at this point as well.
If the buyer's financing falls through can dissolve a real estate transaction. If something major has changed in the buyer's financing over the course of the contract and the buyer can no longer actually afford the home, the transaction can dissolve but the seller may be entitled to some compensation.
Buyer and seller can also amicably walk away but the buyer may forgo their earnest money deposit as compensation for the seller having to relist their property.
I feel the communication is really the key. Real estate transactions are terminated or dissolved all the time for various reasons but good communication is really key to getting everybody what they want and splitting amicably.
If you're worried about getting out of the transaction once you've already gotten into it, we need to talk. There are so many different factors surrounding a real estate transaction that it really comes down to individual desires, needs, and situations. Give us a call today if you'd like to talk through real estate contracts during this uncertain time and how it is extremely possible to still buy or sell during a pandemic.