Can I back out of an offer to purchase?

So you may be wondering, "Can I back out of an offer to purchase without any penalties?". Whether you’re buying a home in Fort Collins or any given area in the US, the sale can fall through for many reasons. But what if you just change your mind? If you’re in contract to buy a home but are having second thoughts and want to back out of your accepted purchase offer, things can get complicated.

It’s not impossible for a buyer to back out of a signed real estate contract with a seller, but there could be repercussions — especially if no escape hatches were included in the deal. Understanding your financial and legal rights as a homebuyer is critical. Here’s what to consider if you’re thinking about rescinding an accepted offer.

Can a homebuyer back out of an accepted offer?

The short answer: yes. When you sign a purchase agreement for real estate, you’re legally bound to the contract terms, and you’ll give the seller an upfront deposit called earnest money. Earnest money shows the seller that you’re serious about your intention to purchase the house and plan to follow through on the agreement.

However, putting certain contingencies in place makes it perfectly legal to back out of an accepted offer if those contingencies are not met. These restrictions, which will be built into the contract, spell out situations in which backing out without penalty would be acceptable. In most cases, you’ll get your earnest money back.

Backing out with a contingency

A standard real estate contract typically comes with a number of contingencies — these are the conditions that must be met in order for you to move forward with a home purchase. This includes a mutual agreement of specific tasks that have to be completed within a certain time frame.

Homebuyers might include contingencies for the home inspection, securing financing with their lender, selling their own home first or the home appraising for less than the sale price. If you back out of an offer because an agreed-upon contingency failed to be met, you can do so with little fuss and still get your earnest money deposit back.

A buyer usually has more protection when walking away from a deal if contingencies are in place. For example, let’s say a home inspection report comes back and there are costly issues, such as a damaged roof that needs to be replaced or cracks in the foundation. With a home inspection contingency in place, you can walk away from the deal, especially if the seller refuses to fix the problem or offer credits to offset the costs. Another important safeguard is a financing contingency, which gives you an out if your lender doesn’t pull through with a loan approval.

To protect yourself, pay careful attention to the contingencies outlined in the agreement, and especially to the deadlines attached to each. For example, you might be required to complete a home inspection (and ask for repairs/credits) within 14 days after the contract is assigned. A financing contingency might need to be met within 30 days to get final loan approval. If you need more time to complete a contingent task, your real estate agent will likely need to file a contract addendum that the seller must approve to get your extension.

Backing out without a contingency

If a homebuyer backs out of a sale for a reason that’s not specifically stipulated in the contract, however, things can get tricky — and potentially ugly. Backing out of an offer for a non-contingent reason means you risk losing your earnest money. Since you put that money down based on the promise that you would follow through with the contract, backing out for any reason that’s not outlined in the agreement means the seller is legally permitted to keep your money.

Thanks for reading! I hope this helps answer your question about backing out of a contract to purchase a home. If you have any other questions about buying or selling real estate in Fort Collins or any surrounding areas, you can reach us at 970-556-8833.

If you are a buyer in a different state than Colorado, we can help you too! Give us a call and we would be happy to help you locate the perfect realtor within our network of real estate professionals.