How long do you have after making an offer on a property to pull out of it without serious legal or other complications?
Let’s imagine you’re looking to purchase your first house, but there’s a possibility I’ll be given a job in a distant area within the next few weeks, in which case all of your plans will alter. How long do you have after making an offer on a property to pull out of it without serious legal or other complications?
Your capacity to withdraw from a property purchase is determined by two factors:
1) the precise moment at which you are “under contract” to purchase the home, and
2) What the contract says regarding canceling the transaction once you’ve signed it.
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When You Have a House Purchase Contract
You are not “under contract” to acquire a home until you (plural “you” if purchasing as a couple) and the sellers have all completed a purchase agreement. It normally takes a few steps to get there.
To begin, in order to make an offer on a property, you will almost certainly present a formal offer to the seller. That offer will most likely include an expiry date, so if the seller does not act on it within a certain length of time, the offer will expire on its own.
But suppose that doesn’t happen and you make an offer to a seller who wants nothing more than to sell you the home.
The level of content in your offer document differs throughout the United States. In California, for example, the standard purchase offer is written in the form of a contract, so the seller can sign it and you’re in contract to buy; however, more often than not, the seller will counteroffer (also in the form of a full purchase agreement), hoping that the buyer will sign that version.
In New York, the buyer provides a far briefer summary of the conditions being provided, and it is the seller’s responsibility to prepare the whole purchase agreement, which the buyer finally signs off on.
Neither of you are legally obliged to anything until both parties have agreed on all the conditions and signed the purchase agreement, at which point you are in contract, and you may withdraw your offer without penalty. Simply have your real estate agent contact the seller’s agent, most likely verbally at first, followed by a written confirmation as soon as possible.
Getting Out of a House Purchase Contract
The situation changes after you sign a contract. Unless one of the contingencies (conditions) included in your purchase contract is not satisfied, you are legally required to complete the transaction. The earnest money deposit that you most likely put down to accompany your contract may be lost if you fail to complete the transaction for a reason not specified in the contract.
In practice, however, most contract contingencies provide significant “outs.” If your house finance falls through, for example, you may be able to terminate the contract. Similarly, if you are dissatisfied with the findings of the house inspection (which is certain to reveal some flaws), you may walk away. Discuss your particular rights under the contract with your real estate agent or lawyer, both before signing and if you need to cancel.
Finally, if you need to cancel the contract and can’t justify it based on one of the contract contingencies, keep in mind that many sellers will be reasonable and not insist on keeping your entire earnest money deposit; especially if it’s clear that your reason for canceling isn’t mere fickleness, but due to a significant change in your circumstances. Again, your real estate agent or attorney is most suited to handle this.