What If I Get Cold Feet When I Go To Buy A House?
I’m sure most people have noticed the changes that have taken place in the housing market over the last several months. This means that if you are currently on the search for your next home, I have good news and bad news for you. The good news is that purchase prices have finally started to come down. The bad news: real estate negotiations and contingencies are BACK in most markets now, including here in the Pacific Northwest. But not to worry—I’m here to walk you through what contingencies are, how to navigate them, and if there’s any way to back out of a contract if necessary.
What Are Contingencies?
Contingencies are used so that you as the buyer have the opportunity to do your due diligence and discover if this is the right house for you.
As your agent it is my job to help you get the information you need during the contingency period. There are several contingencies that you can bake into the contract which in turn gives you the necessary time to learn about every aspect of your new home. You can choose to waive these, but I wouldn't recommend that.
Some of the most popular contingencies written into a contract are Financing, Appraisal, Title, HOA Review, Septic, Home Inspection, and Home Sale (which is making a swift comeback after not seeing any the last two years).
Other Options
Another way to protect yourself is to select the option in the contract that allows you to walk away for no reason and ONLY forfeit your earnest money deposit (also referred to as a good faith deposit). If you end up having a strong change of heart at the last minute, $5,000 is better to lose than what you would spend by buying the home.
Also, make sure you hire a local, full-time agent who is active in the market: one who knows how to write a contract with a lot of protection, and who will also inform you of each contingency period and what you should be researching as you go along. A strong full-time agent will also have the connections to help you with inspections and contractors to make sure you are buying a home with good bones and great systems. Plus, the best agents usually have great support for any contract questions or tough situations, as well as lawyers for legal issues. After all, we are dealing with contract language throughout the transaction.
Why Do Homebuyers Back Out Of A Real Estate Deal?
The most popular reasons homebuyers back out of a deal are due to something found during the inspection period that they couldn’t negotiate or didn’t want to negotiate. We call these “deal breakers.” Another popular reason is because of a financing contingency, which is when buyers fail to obtain financing.
When CAN You Back Out Of A Transaction?
Is it ever too late to be able to back out? Once all of your contingencies are satisfied or waived and all timelines are up, then you are able to back out of a transaction. HOWEVER, if you have no exits based on an actual contingency, then you will likely forfeit your earnest money and lose that deposit.
What Are The Risks That Come With Backing Out Of A Deal, And How Can Buyers Protect Themselves From These Risks?
One thing homebuyers should know before canceling a deal is whether they will lose their earnest money if they back out. Also, could the seller hold them liable for damages?
The best way for buyers to be protected from these risks is to get an agent who understands the contracts associated with buying a house and who can educate them every step of the way. You will also want to make sure that the contract allows a buyer to walk away for no reason and ONLY forfeit their earnest money.
Finally, What’s The Best Way To Go About Canceling A Contract?
Exiting during a real contingency period is the best way, which will protect your earnest money as well. Having an agent who is VERY knowledgeable about contract language and who can give you those “exit points” is important to making sure your earnest money is protected even if you get cold feet.
Interested in buying a house, but nervous about the possibility of needing to back out of a deal? Paige Schulte and her team of Neighborhood Experts will make sure you are protected every step of the way. Give them a call today at (253) 313-4093. Don’t wait to start searching for your dream home!