Buying a home is a big deal — so it’s natural to have second thoughts. If those thoughts cause you to back out of your agreement to purchase, however, you could be in a lot of legal trouble.
What’s at stake? It depends.
Check your contract to see what it says about a breach
When you make a contract for a real estate purchase, you need to ensure you include contingency clauses. These allow you to withdraw without penalty for specific reasons that you state. For instance, if you cannot sell your current house, cannot secure a mortgage, or discover significant faults with the property during a final inspection.
If the contingency clauses do not cover the reason you wish to pull out, then, according to the contract terms, you will probably have to forfeit the earnest money that you paid to the seller to secure your bid. That could be hundreds or thousands lost, depending on what you laid down.
What happens if the seller doesn’t accept that as a solution?
A seller may be able to take legal action when a buyer backs out of a contract. They could claim specific performance, which in short means they ask a court to tell you to fulfill your part of the deal and continue with the purchase.
Alternatively, they could file for damages. To do so, they need to show how your change of heart has caused some financial harm that exceeds the value of your earnest money. For instance, they might produce receipts of money spent during the sale process. Or, if the housing market has plummeted, they could seek to prove how they lost the chance to sell to another buyer when the price was high.
Understanding the contract details and how a court would view things is crucial to solving any real estate contract issue. Sellers may have a few options at their disposal, yet they cannot choose them all at once. Sometimes negotiation is the best option for both sides.