A valid real estate contract requires both an offer and unqualified acceptance. Until you have these, you can change your mind about buying a house for any reason and at any time. However, once both parties sign the purchase offer, the terms of the deal determine how difficult it will be to back out, and whether there will be legal and financial consequences.
Back Out Before Contract Acceptance
Although it’s not a legal requirement and you aren’t required to offer a reason, HomeFinder.com recommends that you notify the seller of your intent to rescind a purchase offer in writing. If you are working with a real estate agent or an attorney, the person representing you should write and deliver the letter to the seller or the seller’s representative. Since there is no valid contract, there are no consequences to backing out of the deal.
Back Out after Contract Acceptance
Once the contract has been accepted and agreed to by both parties, your options for backing out risk-free diminish. However, this still remains possible under certain circumstances.
Backing Out Due to a Contract Contingency
Most real estate contracts include one or more back-out contingency clauses. These function like back-out insurance, and allow you to retract an offer without facing the possibility of a lawsuit or risking your deposit money.
A contingency clause means that although both parties are bound by the contract, the sale won’t become final until and unless the contingencies are met, often within a specified time. Although a contingency clause can focus on anything the buyer and seller agree on, the most common focus on an existing home sale, a satisfactory home inspection and the ability to secure financing. Most state real estate purchase laws have a required contract cancellation form that both parties must sign.
Backing Out for Other Reasons
You’ll likely at least lose your deposit money if you back out of a real estate deal. In addition, a seller can force you to close on a real estate deal by initiating a specific performance lawsuit if you retract an accepted offer after all of the contingencies have been met or “just because” you’ve changed your mind.
However, a seller also has the option to release you from the contract with no consequences. A letter of intent to rescind and a contract cancellation agreement signed by both parties are necessary protections.