Photo: Aleksandr Bagri (Shutterstock)
Can you withdraw from an accepted, signed offer to buy a house? After all, a lot can happen during the closing phase of any sale – job loss, medical emergency, divorce – that may force you to change your plans. The good news is, yes, it is possible to withdraw a signed offer – but if you do, it will determine whether you will lose your serious money.
Can you withdraw from an accepted offer for a home?
Yes, but it could cost you. By signing a sales contract for a property, you are legally bound by the terms of the contract, which usually include an upfront payment known as serious money, usually 1% to 5% of the purchase price. Earning money shows the seller that you are a serious bidder ready to pull the deal.
Of course, even with the best of intentions, there may be reasons not to make the decision to close the deal ahead of time. Because of this, most sales contracts (created by your real estate agent) contain contingencies that allow you to renegotiate or get out of business without losing your serious money. Common eventualities are:
- House inspection: You can step back from a deal if a home viewing reveals unexpected flaws that negatively affect the value of the property.
- Appreciation: If a home appraisal shows the home value is below the purchase price and the seller is not renegotiating, you can get out of the deal.
- Selling your current home: Often times people have to sell a house in order to buy a house. This contingency prevents you from getting stuck paying two mortgages.
- Financing: If you are denied a loan from the bank to buy the house, you can withdraw without penalty.
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As the Washington Post points out, the seller can withhold the buyer’s security deposit and sue for additional damages if they can prove that you deliberately thwarted the deal, either by jeopardizing a credit decision through high debt or by quitting your job.
What if contingencies do not cover your reason for withdrawing an offer?
Let’s say your reason for withdrawing an offer has nothing to do with a contingency in your contract – like getting a dream job in a new city. Then what can you do? Unfortunately, the fate of your serious money rests in the hands of the seller. This is why you want to cancel your listing as soon as possible because the longer you wait, the more inconvenience for the seller.
Talk to your real estate agent about the next steps. Honesty is your best policy as many sellers will be reasonable if your reason for withdrawing an offer is due to a major, unexpected change in your life. Of course, if you only get cold feet once you own the property, you will have less traction. When that happens, you may have to bite the bullet and say goodbye to your serious cash – a costly decision, but better than buying a home you would rather not own.
