Home buyers guide: when can a seller back out of a sale?# Living
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So you’ve gone through the process of working with your Realtor to help you
find the home of your dreams. After previewing several houses you’ve fond
the one that’s right for you. The Offer to Purchase has been written up,
signed by you and the seller and you are now in Attorney Review. Now you ask
yourself; can the seller back out of this deal?
A real estate sales contract, contrary to popular belief, is not ironclad.
There are certain obligations a seller has to meet, and there are those you,
as the buyer must meet as well. Below are some examples:
Attorney Review. By law, there is a three day period after both you and the
seller have signed the contract in which both parties’ attorneys will
review the contract. At any point during this three-day period, both the
seller AND buyer can legally back out of a deal. This feature protects the
seller’s interest in the event a better offer is received. Although a
seller should extend a courtesy by allowing the buyer to counter-offer, they
legally do not have to. Therefore, make sure the offer you are presenting
is a fair one. It would be a shame to lose your dream home over a couple of
thousand dollars when, translated into monthly mortgage payment, can mean a
simple additional payment of just a couple of dollars per month. For example
, let’s assume a seller has set an asking price of $200,000 for their home.
You decide you want to offer $198,000, and you've locked in an interest
rate of 5% with your mortgage company. The $2000 you believe you are saving
would translate into an additional payment of only $10.73 per month. So ask
yourself; is it worth losing a dream home over such a small amount? Again,
make sure you offer a fair price.
Mortgage Contingency. In a sales contract, there is a specific time that is
written into the contract that stipulates when the buyer has to have the
commitment from a mortgage company. If you exceed this time period, a seller
can legally back out of the deal. Therefore, when writing up a contract
make sure you tell your realtor to allow enough time to obtain a commitment
from your bank or mortgage representative. This is relatively simple and
should cause no objections from the seller or their attorney, as long as it
’s within a reasonable time period. Working with a competent Mortgage
company should alleviate this dilemma.
Inspection Period. Okay, so the contracts have been signed, and the
attorneys for both parties have reviewed the contact and have deemed it
acceptable. The next step is to have a home inspection performed. Although
this is not mandatory, you are buying a home, which in many cases is the
biggest investment you will ever make. Therefore it is wise to have this
done. Generally it only will cost the buyer anywhere between $300 to $500 to
have the inspection done. If the inspection discovers defects with the home
, it is up to the seller to repair these defects. In some cases, a seller
will refuse to make the necessary repairs and can opt to terminate the
contract. This inspection period also protects the buyer. If the repairs you
are looking for aren’t made, and the seller is unwilling to reduce the
asking price to help compensate the cost of the repairs you will inevitably
have to make, then the buyer can also legally back out of the sale as well.
Once these conditions are met, it would be very hard for a seller to back
out of a deal. In fact, you as the buyer can sue the seller for Specific
Performance. This means that a judge would force the seller to close on the
deal as agreed upon in the original sales contract. Therefore it is a good
idea to work with a competent Realtor, a trustworthy Mortgage company, and
an attorney who is well versed in real estate laws.
find the home of your dreams. After previewing several houses you’ve fond
the one that’s right for you. The Offer to Purchase has been written up,
signed by you and the seller and you are now in Attorney Review. Now you ask
yourself; can the seller back out of this deal?
A real estate sales contract, contrary to popular belief, is not ironclad.
There are certain obligations a seller has to meet, and there are those you,
as the buyer must meet as well. Below are some examples:
Attorney Review. By law, there is a three day period after both you and the
seller have signed the contract in which both parties’ attorneys will
review the contract. At any point during this three-day period, both the
seller AND buyer can legally back out of a deal. This feature protects the
seller’s interest in the event a better offer is received. Although a
seller should extend a courtesy by allowing the buyer to counter-offer, they
legally do not have to. Therefore, make sure the offer you are presenting
is a fair one. It would be a shame to lose your dream home over a couple of
thousand dollars when, translated into monthly mortgage payment, can mean a
simple additional payment of just a couple of dollars per month. For example
, let’s assume a seller has set an asking price of $200,000 for their home.
You decide you want to offer $198,000, and you've locked in an interest
rate of 5% with your mortgage company. The $2000 you believe you are saving
would translate into an additional payment of only $10.73 per month. So ask
yourself; is it worth losing a dream home over such a small amount? Again,
make sure you offer a fair price.
Mortgage Contingency. In a sales contract, there is a specific time that is
written into the contract that stipulates when the buyer has to have the
commitment from a mortgage company. If you exceed this time period, a seller
can legally back out of the deal. Therefore, when writing up a contract
make sure you tell your realtor to allow enough time to obtain a commitment
from your bank or mortgage representative. This is relatively simple and
should cause no objections from the seller or their attorney, as long as it
’s within a reasonable time period. Working with a competent Mortgage
company should alleviate this dilemma.
Inspection Period. Okay, so the contracts have been signed, and the
attorneys for both parties have reviewed the contact and have deemed it
acceptable. The next step is to have a home inspection performed. Although
this is not mandatory, you are buying a home, which in many cases is the
biggest investment you will ever make. Therefore it is wise to have this
done. Generally it only will cost the buyer anywhere between $300 to $500 to
have the inspection done. If the inspection discovers defects with the home
, it is up to the seller to repair these defects. In some cases, a seller
will refuse to make the necessary repairs and can opt to terminate the
contract. This inspection period also protects the buyer. If the repairs you
are looking for aren’t made, and the seller is unwilling to reduce the
asking price to help compensate the cost of the repairs you will inevitably
have to make, then the buyer can also legally back out of the sale as well.
Once these conditions are met, it would be very hard for a seller to back
out of a deal. In fact, you as the buyer can sue the seller for Specific
Performance. This means that a judge would force the seller to close on the
deal as agreed upon in the original sales contract. Therefore it is a good
idea to work with a competent Realtor, a trustworthy Mortgage company, and
an attorney who is well versed in real estate laws.