You may have been certain you wanted to purchase that home when you submitted an offer, but now you're not so sure. Once you've signed a purchase agreement, however, it can be very difficult to back out of the sale; at least not without losing your earnest money. Here are two options for canceling a home sale while avoiding the associated financial penalty.
Check the Contract
There are a couple of ways you can use the contract itself to help you cancel the agreement without losing your earnest money. The easiest way is to check the contingencies. Most purchase agreements detail conditions that must be met before the sale can go through. The most common is obtaining a satisfactory home inspection. If the inspector lists issues that weren't disclosed previously (e.g. major leak), then you can usually cancel the sale and walk away with your earnest money, for instance. Check to see if there are any contingencies you can invoke to get out of the contract.
Contracts generally must be written up in a specific way to be legally binding (e.g. contain the names of both parties). Additionally, all parties must be of sound mind and not under duress of any kind when they sign the agreement. If the contract isn't written properly or there is some question about the signer's state of mind, the contract may be deemed invalid, and you would be free to walk away.
Negotiate with the Sellers
If the contract is solid and all contingencies have been met, your other option is to discuss the issue with the sellers. The homeowner may be amenable to letting you out of the contract depending on your reason for cancelling and how far you are into the process. For instance, if you have to cancel because your spouse's employer is transferring him or her to a position in another state, the homeowner may agree to let you out of the sale and return your earnest money since the reason for cancelling is out of your control. On the other hand, the seller may hold you to the agreement if you're on the cusp of closing and you want to cancel the sale because you found a different home you liked better.
It may help to offer to pay some of the seller's costs associated with the sale. Even though this may cost you a portion of your earnest money, it's better than losing it all.
For more information about this issue or assistance with finding houses for sale that fit your needs, contact a real estate agent.
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