So you decided to purchase a new family home, but on second thought, you want to abandon the deal? Well, this is not the first time someone has decided to take such an action. We have all have at a point in time cancelled a deal for one reason or the other. Therefore, you can back out of your home purchase deal, as you desire. However, taking such a unilateral decision may come with some consequences.
If you are yet to take such a decision, read on as I explore the conditions you need to meet before cancelling your home purchase deal.
Can You Back Out of a Home Purchase?
As already mentioned you can back out of your home purchase deal, but that depends on the;
- Contract you signed
Most real estate purchase contracts come with an out clause but with conditions. Some agreements provide a specific period within which a buyer can end a deal. We call this period ?a contingency period.? Within the contingency period, the buyer has the opportunity to inspect the property. Since we buy houses with cash, this inspection is needed to ensure value for money.
After the inspection, the buyer can then decide whether to continue with the purchase or not. It is during this period that you can opt out without paying penalties.
But, if you decide to continue with the purchase and the contingency period ends, the real estate contract takes full effect. Any form of contract abrogation after the contingency period may come with penalties.
Why people back out of a home purchase
People back out of home deals for reasons including
- Not meeting mortgage requirement
- Found a new property cheaper than what they intend to buy
- Lost of interest
Penalties for cancelling a home purchase contract
Penalties for opting out of a purchase agreement vary and mostly depend on the deal. There are times that the real estate agent and buyer reach a compromise position. Here are some penalties for not fulfilling your purchase:
- Forfeiting all your deposit – In most deals, you are required to make a non-refundable deposit to show your commitment. This is a strategy adopted by real estate dealers to scare people from opting out. With this, you will lose all your deposit if you revoke the contract after the contingency period.
- Losing a percentage of the deposit ? sometimes, you lose a certain percentage of the deposit you made. Once again, it depends on what the contract says. So let?s say depending on the agreement, you can lose about 20 percent of deposits made.
- Lawsuit: some homeowners may decide to sue you for damages. You were relying on a mortgage facility, so you made no deposit. Unfortunately, the mortgage was not approved and consequently, you couldn?t finalize the deal. In such a situation, the homeowner can sue you for wasting his time and financial loss.
Purchasing a home is a lifetime investment. Therefore, you must think through before making a move. Do you need that property? Is it worth the value? And does it meet your future desired home? Consider all these before signing on a paper to prevent losing hard-earned cash. You should also try as much as possible to negotiate deals in your favour.