Congratulations You’re Under Contract!
A real estate purchase contract, or REPC for short, is the document that both buyer and seller sign when they have agreed upon terms to transfer property from the seller to the buyer. The buyer submits an offer to the seller via the REPC, and the seller can either accept, deny or counter the offer.
Usually, it becomes legal and binding the minute that both parties have signed their acceptance. This means that both the buyer and the seller are contractually obligated to follow through with the transaction.
However, There Might be a Way Out of the Contract
Depending on certain contingencies that can be built into the REPC, both buyers and sellers can possibly legally walk away from a deal. Typically, sellers want the fewest contingencies possible, so that the buyer can’t back out.
Buyers generally want to build as many contingencies as possible into the REPC, so that they have an escape route if something unexpected comes up and they need to cancel.
So Why do Buyers Back Out?
Generally buyers cancel for three main reasons: due diligence, appraisal and financing.
One reason buyers cancel prior to their due diligence deadline is if they have an inspection performed and find the home isn’t in ideal shape, or needs more repairs than they can afford or are willing to do. Most contracts allow the buyer to cancel prior to this deadline with no repercussions, and unless there are contingencies, they also get their earnest money back.
Another contingency that allows buyers to cancel is an appraisal contingency. Basically, an appraisal contingency protects buyers and gives them the ability to walk away from the sale if the home fails to appraise for the agreed-upon purchase price.
Financing is another common reason buyers back out out of a deal. If the buyer can’t obtain the financing for the home, they can write in a contingency to be released from the contract before the financing deadline that was agreed upon in the REPC.
Why do Sellers Cancel?
Sellers may want to back out of a contract if they believe that they can get a higher offer, or if a particular buyer seems less than likely to follow through with the transaction, or maybe because of certain unexpected circumstances. If there are contingencies written into the contract to help them cancel the transaction, they are capable of doing so. If there aren’t, both parties are still bound by the provisions outlined in the contract.
Choose Utah Dream Properties for all of your real estate transactions. As realtors we are educated in all aspects of the buying and selling processes and know how to perform our fiduciary duty to protect our clients. We will keep you informed the whole time, and walk you through every step of the way. We are realtors with your best interests at heart. Call us at 801-821-9400 to see how we can help you!