Your Buyer Just Backed Out!

It is almost closing day! You glance at your phone to see you missed a call from your real estate agent. You call your agent back and find out some bad news. He informs you the buyer for your property just backed out. Now what?

United Country Midwest Lifestyle Properties real estate agents take pride in every aspect of their profession. This situation is a prime example of why we highly recommend using one of our real estate agents to assist you in your property purchasing. Our agents work with you every step of the way. From the showing to the closing- we have you covered.

Why would a buyer back out?

Buyers backing out of a real estate contract is not uncommon. According to the National Association of REALTORS®, Realtor Confidence Index report, five percent of real estate contracts are terminated before closing. There are several reasons why buyers back out of a real estate contract. Some reasons are as follows:

1. Cold Feet–Generally, it is for good faith reasons. But, backing out can have financial consequences. We will talk about that in a moment.
2. Contingencies in the purchase agreement. Read, read, READ your contract!
3. Some state laws allow buyers to back out.

Cold Feet

Some buyers get cold feet. They may have their financing fall through. A home inspection may reveal things they do not like or want to deal with. Sometimes appraisals do not turn out as expected. This affects the home buyer’s ability to get a loan because the house is worth less than first reported.

The buyer may have lost their job. Perhaps the seller may have failed to inform the buyer of an easement with the property, or worse, they failed to disclose serious issues or defects with the home.

While the buyer may have legitimate concerns and legally back out of the purchase agreement, it doesn’t come without its repercussions.

Contingencies in your purchase agreement

There are many unknowns in real estate; for example, the seller may not be aware that the home inspection reveals some serious problems. Maybe the buyer was unable to secure a loan. With all different real estate variables, a contingency clause gives both the seller and the buyer protection.

What is a contingency? A contingency clause in your purchase agreement lays out conditions that must be met before the contract is completed. The contingency clause may include:

1. A list of items that the seller must fix before closing. Failure to do so will give the buyer an out.
2. The buyer must have sold their own home within a certain period. Otherwise, the seller is free to negotiate another offer to purchase.
3. Obtaining a clean title search. A search may reveal a problematic title: liens, easements, or property line disputes.

United Country Midwest Lifestyle Properties real estate agents know the ins and outs of real estate purchase agreement contingencies. We read through the purchase agreement with you and answer any questions you may have about the contingencies that are listed. All contract timelines and state laws will be reviewed as well. Everything you need to protect yourself and your property is included in the purchase agreement.

Earnest money. Who keeps it?

Usually, the buyer puts down earnest money when they sign the offer to purchase. It is an act of good faith toward the seller. This money is deposited into an escrow account. An escrow account is controlled by a third party who performs the closing.  If your buyer backs out for reasons not listed in the contingencies, you most likely with get to keep the earnest money.

Everything in real estate is about timing. Most purchase agreements contain an objection period clause. During this objection period, the buyer may raise any objection and back out, likely having their earnest money returned to them. 

However, if they do this outside of the objection period, they may lose their earnest money- if no contingencies qualify them to back out.

United Country Midwest Lifestyle Properties agents pride themselves on keeping you informed and giving the best real estate service in the area. People and properties. Two of our favorite investments. Give United Country Midwest Lifestyle Properties a call today at 608-742-5000.