Most real estate contracts have out clauses.
Real estate purchase agreements are typically written with a number of opportunities for the buyer to cancel the transaction. In addition to these cancellation options, also known as contingencies, most agreements also leave open the option of a buyer canceling for any reason by paying a penalty. On the other hand, sellers typically have less flexibility should they wish to cancel a purchase contract.
Inspection Contingencies
In most cases, buyers request a period of time to inspect the property. These inspections can include reviews of the property's condition, its operating reports, the state of its title and reviews of the surrounding area. Typically, if any aspect of the property does not pass muster for the buyer, they can cancel the contract and receive a return of their earnest money deposit.
Financing Contingencies
Many purchase contracts also contain a financing contingency which makes the consummation of the transaction dependent on the buyer's ability to get a loan. If the buyer cannot obtain financing, they can walk away from the transaction. Although this is a less broad option for cancellation than the inspection contingency, odds are that if a property is seriously flawed or considerably overpriced, a loan will not be available, letting a buyer walk away.
Changes to the Property
Many contracts specify that the property will be delivered to the buyer in essentially the same condition that it was when the buyer signed off to remove their inspection contingencies. If a seller makes changes to a property, such as, in the case of a commercial property, signing a new lease, or it the seller fails to make repairs to a property such as repairing a roof that was damaged in a hailstorm the week before closing, the buyer can sometimes walk away from the contract.
Termination Without A Reason
A buyer can also terminate a purchase contract without a reason. If they do this, they may lose their earnest money deposit. Although forfeiting a deposit may seem like an undesirable choice, it is a much better option than buying a piece of real estate that is a bad fit. Buyers who consider this option should carefully read their purchase agreement, or, even better, consult an attorney, before moving forward. Generally, if the purchase agreement has a clause referring to the deposit as "liquidated damages," then the seller's sole recourse will be to keep the deposit. If the agreement is not structured this way, though, the seller could actually sue the buyer both for damages and for "specific performance," to have the court compel them to buy the property, anyways.
A Seller's Options
Once a seller enters into a contract with a buyer, their options to cancel the purchase are usually quite limited. After all, a buyer would typically not want to spend money and time on analyzing a property and on third-party reports such as appraisals and inspections if they were not sure that the seller would sell it to them. That being said, most contracts are written in a way that if a buyer attempts to change any part of the transaction, the seller could use that opportunity to refuse the change and potentially trigger the buyer to walk away.
Tags: walk away, away from, buyer walk, buyer walk away, cancel purchase, earnest money, earnest money deposit
