So you found the home of your dreams and signed a real estate contract. Suddenly, you realize it was a huge mistake. But how do you get out of a real estate contract?
Stop thinking… “What have I done?” “What can I do?” “Will I lose my earnest money?” “It’s time to run and hide.” …and take a look at your options.
*By the way, with the use of a knowledgeable Realtor, chances are you won’t be looking for reasons to break your new contract.
Common Ways To Get Out Of A Real Estate Contract
The best way to get out of a real estate contract is not to be in one in the first place. That’s right! It’s easy to get excited about the prospects of a new home. But if you’re unsure about the situation, don’t lock yourself into a contract. Even if you are sure, include contingency clauses to protect your interests.
A contingency clause, according to Investopedia, “defines a condition or action that must be met for a real estate contract to become binding. A contingency becomes part of a binding sales contract when both parties (i.e., the seller and the buyer) agree to the terms and sign the contract.”
Common contingency clauses that can help break a real estate contract…
- An acceptable home inspection. Don’t like the inspection report? Well, maybe it’s time to break the contract.
- Time to review and accept HOA documents. Can’t live with the HOA telling you what color your home has to be? Then it may be time to jet.
- Financing approval.
No money, no deal.
- A title survey. Did the title company find a problem with the title? This may give you recourse to abandon your contract.
- Failure to sell your current home. Most people don’t want to pay two mortgages at the same time. Make sure you can have your house sold before you will be liable for another one.
Other than contingency clauses, how can I get out of a real estate contract?
- Job loss
- Undisclosed crucial information from the seller, such as known issues or work performed with no permit
- Seller’s failure to repair or improve the property based upon agreed upon terms
- Property boundary lines that are presented incorrectly
- Undisclosed easements
So, what if I must break the real estate contract without a good reason?
You can breach a contract even without available contingencies. Keep in mind that once you do, you will likely lose your earnest money and any money spent on appraisals, home inspections and title surveys. In fact, although rare, the seller can sue you for breach of contract. Sellers are sometimes awarded damages from profits lost due to tying up the property under your contract.
Hindsight is 20/20
The best way to make sure you won’t have to get out of a real estate contract is to avoid any contract if your doubts cannot be covered by a contingency clause. As always, it is best to consult a lawyer before breaking any legally binding agreement.
Do you have any questions about real estate contingencies or about real estate contracts in general? Post them in the comments.