When you purchase a house, you and the seller will sign a contract. Under Illinois law, a real estate purchase agreement is legally binding, and as such, you and the seller will be expected to fulfill that agreement.
However, if you find that you need to back out of buying a house, you still might be able to do so, even if you have already signed a purchase agreement. Certain circumstances could make it desirable—or even necessary—to withdraw from the purchase.
POSSIBLE REASONS TO BACK OUT
The most common reason to withdraw from a real estate purchase agreement is financial: you may find that you are unable to secure financing for the house. Fortunately, there are generally contingencies set within the contract that would allow you to back out in that situation.
Other reasons why you might back out include:
- You find that the terms in the contract are better for the seller than for you
- You found another place that you like more
- The house needs repairs or fails inspection
- The agreed upon amount is more than the house is actually worth
- You aren’t able to sell your old home
Again, there are often contingencies set to allow you to withdraw from the purchase without any legal consequences.
A contingency is a clause that sets forth conditions that need to be met to validate the contract. If they are not met, the contract is no longer binding. Some common contingencies that protect home buyers include:
- Mortgage contingency: Also a financing contingency, this clause gives you a set number of days to secure a mortgage. Until the set date, you can back out of purchasing the house. These clauses can include provisions for the type of mortgage you want to obtain, thus ensuring you aren’t locked into the purchase with the first mortgage you’re approved for.
- Appraised contingency: This clause makes sure the buyer is paying a fair price for the home. A monetary value is set in the clause, and if an appraisal of the home finds that it is valued at less than that amount, then the buyer can back out. Alternatively, the seller might have the opportunity to lower the asking price.
- Inspection contingency: This contingency gives the buyer the right to have the property inspected within a certain number of days. If a problem is found, you can back out or request that the seller fix the problem.
- House sale contingency: This will give you a certain period of time to sell your old home, thus allowing you to finance the new one. The seller may counter this with a kick-out clause, which lets them continue marketing the home while the buyer waits for their old house to sell.
These contingencies need to be properly worded in order to be effective, which is why you need an attorney to assist with drafting and reviewing the contract. Also, if the contingencies have been met but you still need to withdraw, a skilled real estate lawyer (like us at Hart & David) could help you negotiate your way out. Often, a seller will allow you to back out under the right circumstances.