When a seller accepts a purchase offer from a buyer, the buyer often has an inspection period. During this time, the buyer takes a closer look at the property and typically has the opportunity to walk away from the contract or request certain repairs from the seller. It is to the advantage of the buyer to state a cause for canceling the contract to avoid any possible litigation from the seller.
Real Estate Laws
Real estate laws and practices vary by state. Some states regularly use attorneys in real estate transactions, and some do not. Laws involving home inspections and seller's obligations also vary by state. The terms of the purchase contract typically spell out the obligations of the buyer and seller, and specify the conditions under which a buyer might cancel a contract without facing legal action from the seller or forfeiting the earnest money deposit.
Contingency
A contingency in a purchase contract modifies when the contract becomes binding. For example, a contingency that the buyer must first sell his own house means the sales contract only becomes binding on the buyer when and if the buyer's home sells, within a specific time frame. A contingency for a home inspection allows the buyer the opportunity to inspect the property. Should the home inspection be unsatisfactory, the buyer normally has the option to cancel the contract.
Home Inspection
Normally, the home inspection period is for a limited number of days after the seller and buyer agree to the terms and they each sign the purchase contract. This might be 10 or 15 days; buyers and sellers can negotiate to extend or limit the inspection period. State real estate laws and purchase contracts can vary in regards to the rights and responsibilities during the home inspection. The buyer might have the right to request certain repairs after the inspection, and if the seller refuses to make the repairs, the buyer can continue with the transaction without the repairs or cancel the contract. Inspections and repair requests occur within the inspection period, as the buyer typically forfeits his rights to walk away or request repairs after the inspection period ends.
Canceling a Contract
Usually, the buyer cannot use the inspection period as a tool to renegotiate price. This sometimes does happen when the inspection turns up a significant repair the seller doesn't want to make and he is willing to reduce the price instead. It is not the time for the buyer to request a cosmetic change, such as different paint color. If the buyer inspects the property and finds sometime he can't live with even if the seller attempts to correct the situation, this is typically grounds to cancel the contract within the home inspection contingency period. This might happen if the buyer discovers the house has a mold issue or excessive noise in the area, beyond the seller's control.
Canceling Without Cause
If the buyer simply decides to cancel because he changed his mind, and states the cancellation had nothing to do with the inspection, this could be an issue for the buyer, causing him to lose his earnest deposit. Since local real estate practices often view the contingency inspection period as a free peek for the buyer, the seller's effort to seek compensation from the buyer might be futile. Depending on state law and wording within the purchase contract, the buyer might not be obligated to give a reason for cancelling during the inspection period.
Tags: inspection period, home inspection, buyer might, cancel contract, purchase contract, from seller
