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When Is It Too Late to Back Out of Buying a House?

home with for sale sign is sold
By Christopher Coble, Esq. | Last updated on

Buying a house is not something you'd take lightly. And when you find the perfect home, you want to keep it. But this is life, and things happen. So, if you've agreed to buy a house and change your mind, can you back out? And is there a time limit on your ability to get out of buying a home?

The answer could depend on just how far into the home-buying process you are before you want to reverse course.

Prior to Signing the Contract

There is always likely to be some negotiation back and forth regarding the sale of any home. And it's important to remember that offers and counter offers are not considered legal agreements to contract until there has been an acceptance. If you make an offer on a home and retract it before any response from the seller, you're probably in the clear. And a seller's counteroffer doesn't create a contract either -- if the seller comes back with a different price or different conditions, you're not bound by your offer or their counteroffer. At this point, you're still bargaining, and you can back out at any time.

Additionally, oral agreements to buy real estate are generally unenforceable. So, if you have yet to put the home purchase in writing, you won't be bound by an oral promise to buy.

After the Sale

Once the sale contract is written and signed, however, your options will be much more limited. If you want to back out of the purchase because of defects discovered after the sale, some states permit the homebuyer to rescind the transaction, though it may be limited to particularly severe defects. Other states only allow buyers to recover money damages as compensation for any defects discovered after escrow.

If you just got cold feet or want to back out of the contract for other reasons, you may need to just breach the contract. Be aware, however, you could be sued for breach of contract, and many sales contracts include clauses for liquidated damages (a specific dollar amount as a penalty for breach) which can be expensive.

What About the Home Loan?

If you applied for a personal loan to help finance your home, federal credit law generally gives you three days to reconsider a signed credit agreement and cancel the deal without penalty. The Truth In Lending Act protects "right to rescind" or "right to cancel" until midnight of the third business day after credit transaction.

Buying a house is not a simple transaction -- make sure you have the advice of an experienced real estate attorney before purchasing your next home.

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