Answering the Hard Questions: I'm Under Contract, Am I Trapped Forever?

Unless you’re some sort of emotionally stable super human, purchasing a home for the first time is equal parts scary and exciting. Heck, sometimes it elicits more feelings of dread than excitement. It can be so hard to pull the trigger on an offer that may arguably be the biggest purchase in your lifetime. Sending out that offer and knowing that if it’s accepted, you are now under contract to drop hundreds of thousands of dollars on what you think is the perfect home… EEEK! So what happens if you change your mind? Is god herself going to open up the skies and smite you? Will you go to jail for breaking a legally binding contract? Will the seller sue you into bankruptcy? For the most part, the answer is no, you will be fine. (Although I think this depends on what kind of deal you made with god to get your offer accepted in the first place. That one is between you two, I’m just a measly human realtor.)

Let’s think about a few scenarios where you’re under contract and you might want to do the dip:

• You get an inspection and the home has way more repairs required than you are willing to take on, and the seller won’t agree to take care of them either

• You lost your job and can’t get a loan

• The appraisal came in low and you don’t have the cash to cover the gap. The seller won’t cover it or come down in price

• You read the condo documents and realized this HOA is actually insane

• You get cold feet or realize that you actually hate every single thing about the home and never want to see it again as long as you live (make sure you do this during your due diligence/inspection period)

• The home becomes damaged/destroyed while you are under contract

All of these are perfectly fine reasons to terminate the contract and oftentimes get your deposit money back, as well. For most of the above, the important factor is timing. Unless you waive contingencies, you have a set number of days from the execution of your contract to walk away. Your due diligence period is designed to give you time to do just that, your due diligence. This is the period of time where you can conduct your inspections, review the reports & do any other investigative work on the property that you see fit. There is also an additional amount of time baked in to negotiate any repairs with the sellers following the inspection. The length of this period is determined with your realtor while you’re putting together an offer. It can be as short or long as you want, but the seller has to agree to the time period proposed. At any point during this time you are able to terminate the contract without penalty for any reason. No ifs, ands, or buts. 

There are other opportunities to walk away outside of your due diligence period as well. If you elected mortgage contingencies, you have an out if your financing falls through. This is a longer period of time and typically applies up until about a week out from closing. If there is a condo or homeowners association, you are given five days to review the documents provided that outline the rules, regulations and financial health of the HOA. If it doesn’t look right or feel good, sayonara!! You can be out of there. Lastly, if the property cannot be delivered in the state it was when the contract was signed, like if a tree fell down and took out the entire house (or something less dramatic but still damaging), you don’t have to buy that house! You can drop that house like it’s hot.

All of that to say, the moral of the story is if you’re nervous about getting locked into a contract, don’t be. There are plenty of failsafes built into the Agreement of Sale that are there to protect you and your realtor will be there to make you aware of all the timelines, deadlines, and options you have along the way.