Cancelling a Purchase Agreement

Cancellation1Although most purchase agreements follow through to closing, there are some times when it makes sense to cancel. It shouldn’t be taken lightly, but when it doesn’t feel right it’s often best to cancel. Most of us don’t listen closely enough to what our bodies are telling us. Did you know there are more nerves in your gut than in your brain? Your gut feeling may be more dependable than you think.

Most purchase agreements have some contingencies, so there are various points in the process where the transaction can be easily cancelled and earnest money will be refunded to the buyer. Common contingencies are…

  1. Inspection – the buyer can cancel after the inspection (usually done 3-5 days after coming to an agreement) and have earnest money refunded
  2. Association documents – the buyer can cancel after review of the association documents (buyer has 10 days to review) and have earnest money refunded
  3. Financing – exact terms depend on the purchase agreement, but if buyer cannot obtain financing the purchase agreement is cancelled and earnest money is usually refunded to buyer

It is more difficult to cancel a purchase agreement if the buyer has a change of heart after all contingencies have been met. If a buyer cancels after passing inspection, association document review and financing underwriting, the buyer usually forfeits the earnest money…which is why sellers prefer a higher earnest money deposit.

Buyers typically have a way out of a purchase agreement in the week or so after coming to an agreement because of the contingencies mentioned above. It is more difficult for a seller to get out of a signed purchase agreement…it is a legally binding document.

While representing a buyer, the seller let us know that he had changed his mind. Evidently he had broken up with his girlfriend and he decided he no longer wanted to sell. My client had already given notice on her apartment and had no intention of walking away from the transaction. Attorneys worked it out and we closed on time!

It’s interesting…in an earlier post this week I talked about how failing to pull permits could result in a cancellation. I had no idea at the time that I would experience that situation this week. My buyer decided to cancel his purchase agreement after association documents revealed that extensive renovations were completed without permits. My buyer didn’t feel comfortable moving forward and cancelled the transaction.

Don’t be afraid to cancel after inspection or review of condo documents…that’s what those contingencies are there for!  The cancellation form is a simple, one-page document that specifies where the refunded earnest money should be sent.

The purchase agreement is a legally binding document not to be taken lightly, but the contingencies are there for your protection. Use them to cancel when it’s appropriate. I see it happen over and over again that when one property doesn’t work out an even better opportunity comes along later!

Written By

I love what I do! Highly insightful, analytical and creative, there is nothing I love more than helping you find the right solution for your real estate transition. My mission is to serve my clients with honesty and integrity, exceeding their expectations in service and support… and to help others by donating a portion of every transaction to Habitat for Humanity.

Related Posts

What Every Homebuyer Should Know About Closing Costs

đź–¨ Print Article Before making the decision to buy a home, it’s important to plan for all the costs you’ll be responsible for. While you’re busy saving for the down payment, don’t...

Transite Heat: is this a problem?

🖨 Print Article If you mention the word transite to about 90% of the population, they either think of HVAC ductwork installed below the concrete floor in a basement, or they...

Subscribe to Our Newsletter for Market Updates & Mid-Century Modern Listings

Our weekly HomesMSP Update includes current local market information and a curated list of mid-century modern properties for sale, plus posts from an inspector, a lender, a stager, info about neighborhoods, life in the Twin Cities… even recipes!

Hidden

Blog Categories

Archives

Sharon and John Hensrud

About Us

The HomesMSP Team is committed to meeting you where you are and listening… really listening to understand you so we can use our extensive knowledge of the market and local neighborhoods to give you personalized service.