Backing out of a real estate sales agreement is more common than you might think. Whether it’s due to sudden financial issues or a problem with the appraisal, several factors can cause the desire to drop your end of the deal. However, without fully understanding the process, it can cost you a significant amount of money. Here’s what to know before you commit to this decision.

What Happens if You Back Out of a Real Estate Sales Agreement?

Homebuyers will usually put a portion of their money into an escrow account to show that they have the finances for the listing. This is known as earnest money and will remain in place until the closing is complete. Choosing to back out could cost you these funds, especially if the reason for breaking the deal isn’t part of the contract.

It also runs the risk of the seller pursuing legal action. This is called “specific performance” and could result in the court ordering the buyer to close on the agreement. However, it’s rare and won’t likely happen, especially if you take protective measures.

How Can You Protect Yourself?

Read through the entire contract in detail and keep an eye out for contingencies. These clauses provide the right to break the contract, including bad home inspection reports, poor financing, or an unacceptable appraisal. These reveal the level of flexibility that you have as a buyer and could help to determine the best route to take.

Homebuyers should also pay attention to the contingency timelines. For example, home inspections usually allow the seller a certain number of days to fix or negotiate any issues that were found during the process. Waiting until the deadline and seeing that nothing’s been done ensures a full return when you back out of the deal.

If you’re feeling unsure about finalizing a housing contract, set up a meeting with Bernardini Law P.C. in North Andover, MA. These attorneys understand the ins and outs of real estate law and will verify that all legal documents are properly in place. They recognize the individual nature of each case and personalize their services to suit their clients’ needs. Call (978) 794-5525 to request a consultation, or visit their website to learn more about their qualifications.