You’ve just made an offer on a house when the unexpected happens.
Perhaps your financing fell through, you lost your job, or you realize you don’t even want to buy the property after all.
And now you need to withdraw your offer. Your mind starts racing.
You ask: Is it possible to withdraw now, so far down the road?
Take a deep breath and relax.
Trust me – you aren’t the first homebuyer to ever have to figure out how to withdraw an offer on a house. In fact, if you know what you’re doing, you can get out of the arrangement without any trouble at all.
Here’s everything you need to know about withdrawing your offer to buy a house.
Why Homebuyers Need to Learn How to Withdraw an Offer on a House
The truth is, if you approach withdrawing from an agreement the wrong way, you could be sued.
It’s rare that a homebuyer would be ordered to actually buy a house they don’t want – and the odds are growing slimmer in today’s rebounding sales market.
What often happens is sellers will get to keep any earnest money the buyers put forward. Sellers may also be awarded damages from profits lost after selling the place for less because the buyer tied it up so long under a contract they didn’t follow through on.
So, you need to figure out your options as a buyer to ensure you get through the withdrawal process while losing as little money as possible. The first thing you need to do is figure out if you have the proper justification for withdrawing your offer.
Determine Your Justification
If you want to avoid paying damages to the seller, you need to figure out if you have any justifications for pulling out of the contract. Because the legal language in contracts is designed to cover as many contingencies as possible, it’s rare that you as a buyer will have a clear way out of the contract.
But there are some scenarios where you’ll have no trouble withdrawing your offer at all.
You may find there are many contingencies allowed in the contract, like:
- Inability to qualify for a mortgage
- Failure to sell your old home
- Undisclosed flaws with the dwelling or unpermitted work
- Job loss
- Damage to the property between initial viewing and closing
- Failure on the seller’s part to meet terms for repairing or improving the property
- Undisclosed easements
- Title problems like mechanic’s liens
- Inaccurately represented property boundaries
Basically, your reasoning cannot be something vague like “poor timing” or “lack of communication.” That won’t fly when you’re trying to get out of the deal unscathed.
So, determine if you have any legitimate grounds to exit the deal. If you don’t, remember that many sellers are reasonable and won’t insist on keeping your whole earnest money deposit. Still, having an attorney or real estate agent around never hurts.
And before ever agreeing on terms in the first place – whether you’re a buyer or seller – you should add in mediation language for handling things more civilly and cheaply.
Put it in Writing
If the seller of the home hasn’t signed the purchasing contract yet, it shouldn’t be any trouble for you to withdraw. In that stage, you’re still just negotiating.
When you change your mind at this stage, you’ll just need your real estate agent or attorney to draft a letter to the seller’s representative stating that you’re withdrawing your offer.
By this point, you shouldn’t have had to deliver any earnest money deposit to the seller. That should only happen after all parties have signed the purchase contract.
However, if the seller has formally accepted the contract in writing, you might be in for a more difficult experience. You’re going to need a purchase contract cancellation agreement.
Draft a Purchase Contract Cancellation Agreement
Doing this requires a real estate agent or attorney, plain and simple. This representative will first write a letter stating your desire to withdraw your offer.
Then your representative drafts the formal document that must be signed by everyone who signed the original real estate contract. It states that everyone signing agrees to cancel the agreements made in the contract and that the contract is officially null and void.
If the seller agrees to it, you can include a stipulation about the seller returning the earnest money deposit back to you. There are times, though, when a seller refuses to return your deposit – so be careful to stay on their good side and keep your agent or attorney close by.
If You Must Default on the Contract
If you’re already past crunch-time and you’re about to reach closing day but decide you need to back out – good luck.
There are some serious complications if you change your mind after you and the seller have signed the purchasing contract, gone through the inspection period, and passed through loan approvals and contract reviews.
When this happens, you’re considered to have defaulted on the contract. You stand to lose your earnest money deposit to the seller as “liquidated damages.”
Some states – including Texas – consider real estate purchases as “specific performance” contracts. Once the contract is signed, both parties are required to carry out any actions outlined in the contract.
The best way to avoid this happening is to retain an attorney before signing any contract. With an attorney, you can negotiate necessary extensions of contingency periods with the seller. This can protect your earnest money deposit in case you run into any unforeseen circumstances.
Also, if the seller forces you to go through with the purchase after claiming “specific performance,” then they are not entitled to seek any money damages. This means you can purchase the property as you were originally agreeing to do, then turn around and begin the selling process on it without losing any extra money.
As the housing market continues to improve, there is a fairer chance you might get away with defaulting without losing any money. Sellers know there’s likely another buyer right around the corner, so they don’t want to tie their property down any longer either and will cut you loose.
At the end of the day, what your contract says is what really matters. But generally, your real estate agent will be able to present you with other ideas of how to withdraw an offer on a house.
Want to make sure you’re safe from complications like these when going into a real estate agreement? You need an experienced and trustworthy real estate agent by your side. If you’re buying (or selling) property in the Austin, Ft. Hood, or Killeen area, contact me today!