Once home buyers find a place they adore, they tend to champ at the bit to seal the deal and move in. And yet every so often, they encounter a hitch that makes them think twice. Maybe more than twice, actually. It probably makes them lie awake in bed in a cold, sweaty panic and think: Oh my God, I've made the worst mistake of my miserable life. Is there any way I can wiggle out of this without losing my shirt?
The thing is, once a seller accepts your offer, odds are you've also ponied up an earnest money deposit -- the cash you put upfront (typically 1% to 2% of the purchase price) to show the seller you're serious (aka "earnest") about the deal. You might be thinking that once that money leaves your hands, it's gone for good if you decide not to follow through. That's not necessarily the case.
Contingencies and legal protections abound that enable home buyers to back out of a deal. Some you'll want to include in your initial purchase contract; others you don't need to request outright and are just your legal right. So if you'd like to keep your options open, make sure to keep these "get out of jail free" cards up your sleeve.
Home inspection contingency
With professional staging, fresh paint, and gorgeous weather ("look at all that natural light, sweetie!"), a home can show beautifully -- but that doesn't mean everything's kosher below the surface. "You can't necessarily tell if there are issues with a home just by walking through it or going to see it at an open house," says Peggy Yee, a supervising broker at Frankly Realtors in Vienna, VA.
If you're concerned the basement may flood or faulty foundation may land you with expensive repairs, your best protection is to include a home inspection contingency in your contract, which will typically enable you to get out of the deal without forfeiting your earnest money deposit. However, "when you have a home inspection contingency, you're on a deadline," warns Danielle Zoller, a real estate attorney at Gordon Feinblatt LLC in Baltimore.
Home inspection contingencies are often set on a seven-day timetable -- meaning you, the buyer, must complete the inspection and send a formal notice to the seller that you're canceling the contract within seven days after signing the purchase agreement.
Be sure to cover your bases. "Some states require that the buyer also send a copy of the inspection report," says Zoller. Also, some home inspection contingencies let the buyer walk for any reason, but depending on the contract, "you may have to give the seller an opportunity to make repairs before you can terminate the contract." Zoller says.
Home sale contingency
If you already own a home, odds are you will want to sell it if you're buying a new one. And luckily, there's a contingency you can put in your sales contract for this as well. If the seller agrees to a home sale contingency, the purchase of the property can take place only if you sell your home by a specific date (e.g., within 30 days).
Because selling a home can take a while, make sure that the time frame you set is realistic. Look at how quickly similarly priced homes in your area are selling. If it's a hot market, a month's time may be fine; however, if places are on the market longer, you may want to widen that window. At the very worst, if your home gets no offers in that time period, you can simply back out.
When purchasing a condo or a property within a homeowners association, the seller must provide you with the subdivision's Declaration of Covenants, Conditions, and Restrictions, or CC&Rs -- legal language for the community's rules and regulations.
These documents include the bylaws, board minutes, reserve funds, master insurance policy, annual budget, a history of special assessments, and what constitute finable infractions.
Depending on the age of the community, you might very well receive hundreds of pages. And some of those rules may not sit well with you: Some HOAs, for example, may have final say over the color you choose to paint your home's exterior, or ban you from placing political signage in your lawn. (So what the heck are you going to do with all those "Chris Christie 2016: Telling It Like It Is" signs?)
You're legally entitled to a specified number of days to review the documents, but review periods vary by state. In Maryland, for example, buyers are given seven calendar days; in Virginia it's three days; and in Washington, DC, it's three business days.
"Your real estate agent should know how many days you're allowed," but it's always best to confirm the information on your own, says Zoller. (If your Realtor is licensed in multiple states, the person may mistakenly confuse one jurisdiction's review period for another.)
The best part: You don't even need to cite a reason why you're canceling the contract. As long as you give the seller notice during the review period, you're allowed to withdraw your offer, keep your deposit, and move on.
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