“Stump the Broker” Ep 2: Can You Back Out of Buying a House After Signing a Contract?
“Stump the Broker” Ep 2: Can You Back Out of Buying a House After Signing a Contract?
The following is intended to be general information for real estate licensees only. Because each transaction is different, before applying this information to any given situation, consult with your broker.
When a real estate market moves as fast as the Bay Area's, we meet the occasional client who has a change of heart and asks a big question: Can you back out of buying a house after signing a contract?
For the answer, watch this episode of Abio's "Stump the Broker" video series, in which principal broker Cameron Platt tackles the tricky topic of canceling a real estate contract. The real trick here is… NOT GETTING SUED.
Cameron's answer addresses real estate agents whose buyers are starting to feel iffy and twitchy about their signed offer. But buyers need to know this stuff, too. Everyone involved must understand where there are stopgaps and where there are pricey pitfalls.
This episode covers:
- Can you back out of an accepted offer?
- Backing out of an accepted offer with a contingency
- Backing out of an accepted offer without a contingency
Watch the short video and read the highlights below.
Episode Notes
Can you back out of buying a house after signing a contract?
Cameron's short answer is yes. Well, a conditional "yes."
The first thing to consider is how deeply you are into the contract and whether there are contingencies.
Backing out of an accepted offer with a contingency
A contingency is like an escape valve. Contingencies are conditions written into the contract that need to be met within a certain time frame to complete a home purchase. Some common buyer contingencies involve a home inspection, securing a loan, selling their own home first, and a property appraisal.
When contingencies aren't met, the buyer has cause to back out. That's the cleanest way for a buyer to cancel a contract and get the deposit refunded.
Backing out of an accepted offer without a contingency
Here in the competitive Bay Area, we see a rising number of buyers drop all contingencies so their bids stand out and have a greater chance of being accepted.
That narrows the buyers' options later if they want to cancel the contract.
If a wobbling buyer is lucky, the seller gets cold feet and wants to back out, too. Or maybe the seller makes a late disclosure – like revealing a week before closing that there's a sinkhole under the primary bedroom.
But these are rare situations.
Walking away with no reason is costly. Say goodbye to your deposit. And be aware you might be sued for breach of contract.
☞ A buyer in this situation should consult with an attorney.
Dig deep to uncover why the buyer wants to cancel
Sometimes the buyer actually still wants the house but is having doubts about the current terms or price.
If that's the case, there's no legal reason why the buyer and seller can't renegotiate a contract that's already in place.
In fact, some sellers might decide to be flexible at this point, especially when the alternative is having to put the home back on the market.
You'll never know unless you ask.
Does something real-estate related have you STUMPED?
Ask your question in the comment section here or email Cameron at [email protected]. He could answer you in a future episode!
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About Cameron Platt: Cameron is Principal Broker and Co-Founder of Abio Properties in the San Francisco Bay Area. He serves as a Director for the National Association of REALTORS and the California Association of REALTORS, where he helps keep standard forms updated and serves as a Trustee of the Legal Action Fund. Cameron describes himself as a “recovering” attorney; he changed careers after realizing he had a stronger passion for helping clients in real estate transactions than in court. Cameron co-founded Abio Properties in 2016 because he believed that the traditional real estate brokerage model could be better – more open and collaborative. Learn more here.
Our Lawyers Said We Have to Include This: "Stump the Broker" is intended to be general information for real estate licensees only. Because each transaction is different, before applying this information to any given situation, consult with your broker.