Before you can move into a new home in California, you’ll typically need to sign a purchase agreement. Unfortunately, situations can arise where you need to back out of the purchase agreement you signed.
Is backing out of a home purchase agreement possible?
Yes, it’s always possible to back out of an agreement to purchase a home. The real question is whether or not you’ll face penalties for making this decision. If you have contingencies in place, you can back out of a purchase agreement without facing any problems. Many real estate matters involve contingencies in purchase agreements and other documents.
What contingencies should be in a purchase agreement?
You can include financing-related contingencies into your purchase agreement. This contingency protects you if you lost your job, no longer qualifying you for the mortgage you previously applied for.
Another common contingency involves home inspections. A home inspection provides peace of mind for a buyer, ensuring that they get what they pay for. Unfortunately, home inspections can uncover issues that a seller might have intentionally or unintentionally hidden from a buyer. With a home inspection contingency in your purchase agreement, you can back out of buying a problematic property.
You can also back out of a purchase agreement over an appraisal-related problem. For example, imagine that a seller asks for $200,000 for their property. However, a home appraiser states that this property isn’t worth more than $150,000. If the seller won’t lower the price, an appraisal contingency gives you the right to back out of a purchase agreement.
Several contingencies in purchase agreements protect potential home buyers who want or need to retract an offer. Without contingencies, you could have to pay a seller or face legal action for backing out of a purchase agreement.