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Stay or Walk Away? What Happens When a Buyer Breaks a Contract

Stay or Walk Away? What Happens When a Buyer Breaks a Contract

Making the choice to buy a home is obviously a serious decision. But, you know what else is quite a conundrum? Deciding to walk away from a home you’ve been planning to buy. For a number of different reasons, prospective buyers may be on their way through the closing process when they decide that they simply cannot go through with their purchase.

What could make a buyer do such a thing? Here are four reasons buyers may walk away from a home purchase:

1. A Low Appraisal. If a home is appraised for less than the contract price, a buyer may be forced to pay more money up front. Banks typically will not let a buyer borrow more money than they think a house is worth. So, a buyer may choose to get a new appraisal or they may choose to walk away… if there is an appraisal contingency in place.

2. A Failed Inspection. A failed home inspection can be a definite deal breaker for buyers. Some buyers may be OK with immediately putting money into a home when they buy it, but some are not. Similarly, some sellers may be willing to renegotiate a sales contract or fix any issues that come up during a home inspection. Some won’t. Either way, a home inspection contingency should be worked into the contract to protect buyers and sellers.

3. Title Drama. You pay a title fee during the closing process so that research can be done to make sure your home is available for purchase. If a title issue arises during that research, a buyer may choose to walk away from the home purchase. After all, title disputes can be lengthy and expensive!

4. Health Concerns. Older homes have some potential to cause health problems. If asbestos, lead or mold are found in a home, a buyer may choose to walk the other way in a hurry! Of course, these contaminants can be removed, but that could be costly. Keep in mind that these type of concerns are likely to show up in a home inspection. So, again, be sure to have an inspection contingency.

What happens when an otherwise-interested buyer walks away from a home purchase? Well, it depends actually. First, both the buyer and seller must sign a new contract to confirm the cancellation of the original sales contract. Then, it all comes down to the reason behind the cancellation. If a buyer walks away from a home because of a contingency, like a failed inspection or low appraisal, they may be able to recoup their deposit or hand money. If they break the contract for any other reason, they may lose any deposit money they’ve put down on a home.

Need some help making major decisions about buying a home? Contact an expert real estate agent today!