{"id":12248,"date":"2019-09-18T12:57:59","date_gmt":"2019-09-18T19:57:59","guid":{"rendered":"https:\/\/www.homelight.com\/blog\/?p=12248"},"modified":"2024-01-12T11:44:32","modified_gmt":"2024-01-12T19:44:32","slug":"what-happens-when-homebuyer-backs-out","status":"publish","type":"post","link":"https:\/\/www.homelight.com\/blog\/what-happens-when-homebuyer-backs-out\/","title":{"rendered":"What Happens When a Home Buyer Backs Out Of The Deal?"},"content":{"rendered":"

Backing out of a real estate transaction is not as uncommon as you might think. According to the National Association of REALTORS\u00ae (NAR) Realtor Confidence Index report, around 5% of real estate contracts are terminated before closing<\/a>.<\/p>\n

Usually, buyers terminate contracts because of problems with their financing, unexpected home inspection results or appraisal issues. So, what happens when a buyer backs out? Let\u2019s lay it all out:<\/p>\n

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Source: (Benjamin Child\/ Unsplash)<\/figcaption><\/figure>\n

Consequences of backing out<\/h2>\n

While a buyer can legally back out of a home contract, there can be consequences for doing so. For example, you can lose your earnest money<\/a>, which could amount to thousands of dollars or more.<\/p>\n

That is unless your reason for pulling out of the deal is stipulated in your contract.<\/p>\n

Earnest money is used to show that the buyer is going into the contract in good faith. The money is held in an escrow account until closing by a third party such as a title company.<\/p>\n

If you back out of the deal and do so for a reason that was not explicitly included in the contract, you could be out your earnest money.<\/p>\n\n\n\n\n\n

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Contingencies and backing out<\/h2>\n

Contingencies are basically clauses in real estate contracts that lay out conditions for the contract\u2019s completion. Contingencies exist because there are a lot of unknowns in both buying and selling a home.<\/p>\n

A buyer usually doesn\u2019t know how the home inspection will turn out when they put in an offer. Likewise, the seller usually doesn\u2019t know if the buyer will be able to secure proper financing when they accept an offer.<\/p>\n

Contract contingencies protect both parties from these unknowns. Most real estate contracts include contingencies that protect both the buyer\u2019s and seller\u2019s interests.<\/p>\n

The most common contingencies<\/a> in real estate contracts are:<\/p>\n