A purchase contract binds both buyer and seller. Contingencies let a buyer back out or renegotiate if certain conditions are not met.
Common contingencies
- Inspection: the right to inspect and request repairs or cancel.
- Financing: the contract depends on getting a mortgage.
- Appraisal: the home must appraise for at least the price, or terms may be renegotiated.
- Title: the seller must provide clear title.
- Sale of your current home in some contracts.
Earnest money
Buyers typically put down earnest money, held in escrow. If you cancel properly under a contingency, you generally get it back. If you back out without a valid reason, the seller may keep it.
Deadlines matter
- Note each contingency deadline.
- Give written notice by the deadline if you want to cancel or renegotiate.
- Do not waive contingencies without understanding the risk.
- Keep all documents.
- Ask your agent or attorney about local practices.
Get help
Real estate contracts are legally binding. In some states attorneys handle closings, and in others agents and title companies do. A real estate attorney can review the contract and explain risks.
Frequently asked questions
Can a seller refuse repairs?
Yes. You may negotiate, accept as is or cancel if the contract allows.
What happens if the appraisal is low?
You may renegotiate, pay the difference or cancel under the appraisal contingency.