The buyer can cancel under certain circumstances, but there are rules to the process.

Real estate transactions are based on the legal premise of “Good Faith.”* It’s assumed that the buyer intends to buy the property, and that the seller intends to sell the property. If you make an offer to purchase a particular home, in good faith you are telling the seller that you intend to buy his home.

If you negotiate for a property, reach an accepted offer and then cancel because you’ve changed your mind, you ARE at risk of losing your initial deposit, which is usually between 2 and 3% of the purchase price. 

Although, we rarely see this happen, in a down market anything is possible. If you’ve halfheartedly entered into contract to buy a particular property, the home is off the market and not available for anyone else to purchase. When you pull out, it’s possible you’ve “damaged” the seller. As previously mentioned, we never actually see this happen, but it is possible and within the seller’s legal rights to question why you are pulling out of the deal. In most transactions the seller wants to move on and not get tied up in legal issues, so he will let his buyer cancel.

When can a deal be canceled?

There are many reasons that allow a buyer to pull out of a deal, but they are all based on the belief that the buyer has been, and is acting in good faith. Depending on how the purchase agreement and counter offers were written, some reasons a buyer can cancel include:

Inspection/owner disclosures 

Found defects, neighborhood issues, seller unwilling to correct major issues

Loan

Not being able to get a loan based on the terms agreed to within the purchase agreement 

Appraisal

The home is not worth what you agreed to pay for it

Title 

There is a cloud on the title, which makes it hard or impossible to transfer ownership

*I am not a lawyer! if you are thinking of canceling a deal you’re in, talk to your agent and if needed, your attorney.

Last updated on January 24, 2012 by Blake Roberts